<PAGE>   1

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                                   Form 10-K

Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934

For the fiscal year ended October 31, 1995

                          COMMISSION FILE NUMBER 0-588

                           COMMERCIAL INTERTECH CORP.
             (Exact name of registrant as specified in its charter)
           Ohio                                   34-0159880
(State or other jurisdiction of             (I.R.S. Employer
incorporation or organization)              Identification No.)

1775 Logan Avenue, Youngstown, Ohio                 44501
(Address of principal executive offices)            (Zip Code)
                          (216) 746-8011
        Registrant's telephone number, including area code

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                          NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
         COMMON STOCK, PAR VALUE $1 PER SHARE
                    (Title of class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days.  Yes  X      No 
                                                       -----       -----

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [ ]

     As of January 2, 1996, 15,414,229 common shares were outstanding, and the
aggregate market value of the common shares (based upon the last price on that
date) was approximately $279,383,000.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Certain portions of the documents of the Registrant listed below have been
incorporated by reference into the indicated parts of this Annual Report on
Form 10-K.

     Notice of Annual Meeting of Shareholders March 27, 1996 and Proxy
Statement filed January 18, 1996. .. Part III, Items 10-13 
                                     Part IV, Item 14

     The exhibit index is located on page 62.





                                      -1-
<PAGE>   2
                                    Part I

ITEM I.    BUSINESS

         (a)   General development of business:

         Commercial Intertech Corp. (formerly Commercial Shearing, Inc.) was
incorporated in Ohio in 1920.  The Company is engaged in the design,
manufacture and sale of products in three business groups: hydraulic systems,
building systems and metal products, and fluid purification.  In January 1986,
the Company acquired Cuno, Incorporated ("Cuno"), a manufacturer of fluid
purification products.  Before that acquisition, hydraulic systems and building
systems and metal products accounted for all of the Company's business.

         (b)   Financial information about industry segments:

         See Note I of the Notes to Consolidated Financial Statements on pages
49-51.

         (c)   Narrative description of business:

HYDRAULIC SYSTEMS

         Hydraulic systems consist primarily of gear pumps and motors, control
valves and telescopic cylinders for use generally on heavy-duty mobile
equipment such as dump trucks, cranes, refuse vehicles, front-end loaders,
backhoes and mining machines.  Other products manufactured by the Company
include hydraulic test equipment for military and industrial applications,
hydraulic steer transmissions for military vehicles, mobile electrical power
generators, hydraulic tilt and trim mechanisms for recreational boating and
axial piston pumps and motors for industrial and marine applications.  The
Company's gear pumps and motors, control valves and telescopic cylinders are
sold primarily to original equipment manufacturers by the Company's hydraulic
sales organization consisting of approximately 76 persons in the United States
and Canada and approximately 75 persons outside North America.  A  portion of
the Company's sales is made to independent distributors for resale primarily to
the replacement market.

         The Company acquired the stock of ORSTA Hydraulik in May 1994.  ORSTA
Hydraulik, a former East German state-owned enterprise, is a manufacturer of
hydraulic cylinders, piston and gear pumps, power packs, and hydraulic testing
equipment.

         The Company acquired the assets of Kenart EMC, Inc., formerly doing
business as Teknar EMC, Inc. in February, 1991. Teknar manufactures a line of
electronic motion control products. The Company relocated operations to an
existing production facility in Minneapolis, Minnesota.





                                      -2-
<PAGE>   3

ITEM I.    BUSINESS (Continued)

         The Company acquired Cylinder City, Inc., a manufacturer
and marketer of hydraulic cylinders located in Minneapolis,
Minnesota in June, 1990.

         The Company believes that it is the largest supplier of gear pumps and
is among the leading single-source suppliers of hydraulic systems for mobile
equipment in the United States.  The market for hydraulic components is highly
competitive.

BUILDING SYSTEMS AND METAL PRODUCTS

      The building systems and metal products operations consist of two units:
metal stampings and Astron (custom-engineered metal buildings).  The Company
produces custom and standard metal stampings, including tank ends and a wide
variety of other stamped steel products, such as wheels for tracked vehicles,
components for railcar brake activators, couplings and covers for mechanical
power transmission applications, large circuit breaker covers, and enclosures
serving many purposes.  The sales and marketing activities for metal stampings
are conducted in North America with exports to Pacific Rim and South America by
a sales organization of approximately 23 persons.   The metal stamping unit
competes aggressively with regional domestic companies that often may have
lower producing costs.  Additionally, standard products are offered for sale
from seven (7) fast service distribution centers in Dallas, Texas; Atlanta,
Georgia; Chicago, Illinois; Hagerstown, Maryland; Seattle, Washington;
Middleboro, Massachusetts and Orange, California.

         Metal Stampings purchased the former Hall F&D Head Company in Saginaw,
Texas, in 1995 now known as the Southern Metals Division.  This Division along
with the Orange County facility produces medium and large diameter products for
the storage tank and pressure vessel industries.

         Astron, the European market leader in Metal Building Systems
produces single and multi story buildings that serve as aircraft hangars,
indoor athletic facilities, automobile showrooms, offices, supermarkets,
factories and warehouses.  Astron buildings are sold throughout the twelve
countries of the European Economic Community, in Scandinavia and in Eastern
Europe, as well as in China and South Korea.  This division developed its own
computerized building pricing and proposal system, known as Cyprion, that
tailors buildings to customers' precise dimension and design requirements.
Through Cyprion, Astron's nearly 400 qualified builder/dealers can provide
pricing and building plans in a fraction of traditional architectural time.
The builder/dealers are supported by Astron's sales force of nearly 91 persons.
Additionally, Astron has developed state of the art work stations utilizing
computer design technology which automatically configures optimum parameters
for more efficient use of material maximizing manufacturing technology.





                                      -3-
<PAGE>   4
ITEM I.    BUSINESS (Continued)

         Four years ago Astron entered into a joint venture with Arbed,
Europe's fifth largest steel producer, and is now producing multistory steel
buildings for European markets. Commercial acquired the remaining interest from
Arbed effective November 1, 1995.  In addition, in 1992 the Astron Division
licensed Geoyang Development Co., Ltd. of South Korea, to manufacture, sell and
erect Astron buildings in Korea.  Geoyang now know as POSEC, is also
cooperating with the Company's Luxembourg and Singapore sales companies for
marketing and manufacturing throughout the Pacific Rim.  POSEC is a Division of
Posco Steel, the world's second largest steel producer.


FLUID PURIFICATION

         The fluid purification group operates worldwide with two
major divisions, process and consumer.  The process division manufactures a
broad range of filtration products for general and fine filtration
applications.   The general filtration product line includes gradient density
cartridges made from resin impregnated fibers and cartridges made from
thermally bonded synthetic bicomponent fibers, as well as cleanable metal
filter products.  The general filtration products are used extensively in
chemical, petrochemical, paint and coatings industrial applications, as well as
in prefiltration and service applications for the food, beverage, utility and
pharmaceutical industries.  The fine filtration product line provides critical
filtration and separation performance primarily to the food, beverage,
diagnostic, biotechnology, medical and pharmaceutical markets.  The fine
filtration products range from Zeta Plus(R) charge modified felted depth
filters to membrane filters which are made of nylon, polypropylene and
polytetrafluorethylene materials.  The general and fine filtration product
lines are complemented by a broad line of metal and plastic housings, which are
the pressure vessels that hold filters.  The process housing line includes
products made of plastic, carbon steel and stainless steel, and is capable of
meeting sophisticated customer demands for sanitary, crevice free and even
mirror-like 10RA finishes.

         The consumer division is principally involved in manufacturing
products that purify water for drinking.  The consumer filtration product line
consists of a variety of filter cartridges with capabilities which include
similar products to the process resin impregnated and bicomponent fiber
products, as well as carbon cartridges.  The reverse osmosis product line,
though principally focused on drinking water, has made inroads into certain
commercial or industrial niche applications, such as lithography, car washes
and food service.  The drinking water product range includes drinking water
systems for fast food restaurant chains, ice maker filters for appliances,
point of use countertop or under-the-counter filters or reverse osmosis





                                      -4-
<PAGE>   5
ITEM I.    BUSINESS (Continued)

FLUID PURIFICATION (Continued)


systems and whole house filter systems.  The acquisition of Water Factory
Systems, a manufacturer of residential, commercial and industrial reverse
osmosis systems, brought expanded production and technical capabilities to the
consumer division.

         The Company believes that it is one of the leading suppliers of
general process filtration products.  This industry is characterized by a
limited number of major suppliers including Pall Corporation, subsidiaries of
divisions of Parker Hannifin Corporation and MEMTEC.  The fine filtration
market is served by certain major competitors, with Pall Corporation and
Millipore Corporation being the most significant.  Cuno's fine filtration depth
filter cartridges hold a leadership position in the market, and although its
membrane product line holds a relatively small market share its sales are
increasing.  The consumer division's principal competitor is a subsidiary or
division of Ametek Corporation.  Consumer has long been a leading supplier to
the plumbing wholesale channel, and has been gaining penetration in the food
service, OEM and direct marketing segments of the business.  Consumer has a
modest position in the retail trade with a split between specialty water
quality dealers or kitchen and bath shops.  In the food service market, a unit
of Culligan is the leading supplier.

         Process filtration products are distributed in the United States by a
group of independent distributors, most of which have been distributing these
products for at least 18 years.  In the international market, sales are made
either direct or through approximately 100 distributors in 75 countries.  The
consumer market is reached by a combination of Company sales personnel and a
significant number of distributors and wholesalers, as well as through OEM
relationships.  Life science products are marketed direct to diagnostic and
medical OEM's.





                                      -5-
<PAGE>   6
ITEM I. (Continued)

MANUFACTURING

         The Company manufactures hydraulic systems in 16 plants and building
systems and metal products in five plants worldwide.  The Company's hydraulic
manufacturing operation is highly integrated and the Company purchases few
components from independent suppliers.   The Company has developed tooling for
a substantial number of  its fabricated metal products, which enables a
reduction in the costs and time of manufacturing. Cuno maintains four
manufacturing facilities in the United States and three manufacturing
facilities abroad.  The manufacture of the Cuno fluid purification products
employs numerous proprietary processes.


RESEARCH AND PRODUCT DEVELOPMENT

         The Company conducts research and development primarily in its
hydraulics systems and fluid purification product groups.  In fiscal 1995 the
Company expended $5,966,000 for research and  development of various hydraulic
products as compared to $5,409,000 and $4,914,000 in 1994 and 1993,
respectively.  The Company expended $2,483,000 for research and development for
fluid purification products during 1995, $1,884,000 in  1994 and $1,794,000 in
1993.  The Company intends to continue substantial expenditures on research and
development in this area in order to bring developmental products to market.

PATENTS AND TRADEMARKS

         The Company currently holds registered trademarks and patents
associated with certain existing products and has filed applications for
additional patents covering certain of its newer products.  Although the
Company considers patents and trademarks significant factors in all of its
businesses, it does not consider the ownership of patents essential to the
operation of its hydraulic systems and building systems and metal products
groups.  The Company relies on product quality and features, the strength of
its marketing and distribution network and on new product introductions rather
than on its existing patents to protect and improve its market position in the
hydraulic systems and building systems and metal products groups.  Cuno
currently holds numerous patents, has others pending and has registered its
trademarks.  Cuno considers many of these patents and trademarks important to
its business.





                                      -6-
<PAGE>   7
ITEM I.  (Continued)

SEASONALITY

         Because sales of certain hydraulic systems and custom-engineered metal
buildings are related to the construction industry, this portion of the
Company's business is affected by the seasonality of that industry.

EMPLOYEES

         The Company employs approximately 4,572 full-time employees worldwide.
The Company believes that its labor relations are generally satisfactory.

BACKLOG

         The backlog of orders believed to be firm at the end of fiscal 1995
was approximately $169,500,000.  Backlogs at the end of fiscal years 1994 and
1993 were $154,000,000 and $107,000,000, respectively.  Registrant expects a
substantial portion of its order backlog at the end of 1995 will be shipped
during fiscal 1996.

          (d)  Financial information about foreign and domestic operations and
export sales.

         Note I - Segment Reporting - to the Notes to Consolidated Financial
Statements on pages 49-51.





                                      -7-
<PAGE>   8
ITEM 2.    PROPERTIES

         The principal plants of the Registrant and its subsidiaries by
industry segments are located in:
<TABLE>
<S>                                  <C>
Owned:
                                     Building Systems and
Hydraulic Systems                    Metal Products
--------------------                 --------------
Youngstown, Ohio                     Youngstown, Ohio
Hicksville, Ohio                     Diekirch, Luxembourg
Kings Mountain, N. Carolina          Orange, California
Benton, Arkansas                     Saginaw, Texas
Mairinque, Brazil                    Sternbeck, Czech Republic
Grantham, England
Minneapolis, Minnesota               Fluid Purification
Port Melbourne, Australia            ---------------------
Warwick, England                     Meriden, Connecticut
Chemnitz, Germany                    Stafford Springs,
Geringswalde, Germany                  Connecticut
                                     Enfield, Connecticut
                                     Mairinque, Brazil
                                     Blacktown, Australia
                                     Mazeres, Toulouse, France
                                     Chemin du Contre Halage
                                       Les Attaques, Merek,
                                       France
                                     Kita-Ibaragi, Japan
</TABLE>

<TABLE>
<CAPTION>
Leased:
-------
<S>                                  <C>
Building Systems and
Metal Products                       Fluid Purification
--------------------                 ------------------
Hagerstown, Maryland                 Irvine, California
Chicago, Illinois                    Jurong, Singapore
Atlanta, Georgia
Seattle, Washington
Middleboro, Massachusetts
</TABLE>


         Properties of Registrant and its subsidiaries are suitably constructed
and maintained for their respective uses.  Details of liens on property are
given in Note B - Debt of the Notes to Consolidated Financial Statements on
pages 36 and 37.


                                      -8-
<PAGE>   9
ITEM 3.    LEGAL PROCEEDINGS

         As of the date hereof there is no pending litigation of a material
nature, other than ordinary routine litigation incidental to the business, to
which the Registrant or any of its subsidiaries is a party or which may affect
the income from, title to, or possession of, any of their respective
properties.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None

ITEM 4A.   EXECUTIVE OFFICERS OF THE REGISTRANT

         Information regarding executive officers of the Registrant is
presented in Part III below and incorporated here by reference.

                                    Part II

ITEM 5.    COMPANY COMMON STOCK

         The Company's common stock is traded on the New York Stock Exchange
under the ticker symbol TEC.  The following is the range of high and low sales
prices and cash dividends paid per share for fiscal 1995 and 1994 by quarters.
All amounts have been restated for the effects of a three-for-two stock split
effective September 1, 1994.

<TABLE>
<CAPTION>
                             RANGE OF SALES
                                 PRICES         
                             --------------     DIVIDENDS         
                             HIGH       LOW     PER SHARE
                             ----       ---     ---------
    <S>                     <C>       <C>        <C>
    1995:
         First quarter . . .$19 5/8   $15 3/4    $.125
         Second quarter. . . 22 3/8    18 3/4     .125
         Third quarter . . . 22 3/4    15 7/8     .125
         Fourth quarter. . . 20 3/4    16 7/8     .135
                                                 -----
                                                 $.510
                                                 =====

    1994:
         First quarter. . . $14       $12        $.113
         Second quarter . .  16        12 2/3     .114
         Third quarter. . .  19 5/6    14 5/6     .125
         Fourth quarter . .  20 5/12   17 3/8     .125
                                                 -----
                                                 $.477
                                                 =====
</TABLE>

        As of October 31, 1995, there were 3,785 shareholders of record of 
Common Stock.





                                      -9-
<PAGE>   10
ITEM 6.    SELECTED FINANCIAL DATA

SUMMARY OF FINANCIAL DATA, 1985 - 1995
Commercial Intertech Corp. and Subsidiaries

<TABLE>
<CAPTION>
(in thousands, except per-share data and ratios)  1995      1994      1993      1992      1991      1990
<S>                                             <C>       <C>       <C>       <C>       <C>       <C>
INCOME DATA - Note A
  Net sales. . . . . . . . . . . . . . . . .    $621,836  $516,931  $448,577  $450,608  $436,961  $453,075
  Gross profit . . . . . . . . . . . . . . .     184,979   153,230   128,880   132,966   135,172   142,907
  Interest expense . . . . . . . . . . . . .       6,912     4,952     5,744     6,277     5,881     6,170
  Income from continuing operations
     before income taxes . . . . . . . . . .      39,942    27,803    20,602    23,349    36,215    50,791
  Income taxes . . . . . . . . . . . . . . .       9,559     8,184     6,587     9,304    16,097    23,184
  Income from continuing operations. . . . .      30,383    19,619    14,015    14,045    20,118    27,607
  Net income . . . . . . . . . . . . . . . .      30,383    25,081    14,015    17,436    11,103    27,607
Earnings per share - Note B
     Primary:
        Income from continuing operations. .        1.82      1.14       .79       .65       .93      1.36
        Net income . . . . . . . . . . . . .        1.82      1.50       .79       .88       .32      1.36
     Fully diluted:
        Income from continuing operations. .        1.72      1.09       .76       .63       .88      1.31
        Net income . . . . . . . . . . . . .        1.72      1.41       .76       .84       .32      1.31
     Dividends per share of common stock:
     Cash. . . . . . . . . . . . . . . . . .         .51       .48       .45       .45       .45       .44
     Stock . . . . . . . . . . . . . . . . .         --        50%       --        --        --        --

OTHER FINANCIAL DATA - Note A
  Total assets . . . . . . . . . . . . . . .    $459,856  $422,978  $347,335  $349,999  $335,062  $361,559
  Current assets . . . . . . . . . . . . . .     253,020   235,366   170,965   169,013   158,272   182,466
  Less current liabilities - . . . . . . . .     157,174   134,966   110,199   109,170    92,460   100,824
     Net working capital - . . . . . . . . .      95,846   100,400    60,766    59,843    65,812    81,642
  Net plant investment . . . . . . . . . . .     142,726   125,437   114,981   122,149   120,825   120,888
  Gross capital expenditures . . . . . . . .      37,437    23,052     9,435    14,116    20,097    22,831
  Long-term debt . . . . . . . . . . . . . .      73,929    77,020    78,059    84,392    54,718    69,852
  Redeemable preferred stock . . . . . . . .           0         0         0         0    38,491    37,594
  Shareholders' equity . . . . . . . . . . .     183,132   153,760   122,937   121,849   116,344   130,265
  Shareholders' equity per share -
     Note C. . . . . . . . . . . . . . . . .       11.50      9.82      7.93      8.04      7.85      8.81
  Actual number of shares outstanding
     at year-end . . . . . . . . . . . . . .      15,440    15,199    15,056    14,864    14,686    14,781
  Average number of shares outstanding
     during the year . . . . . . . . . . . .      15,582    15,327    15,096    14,863    14,888    16,994

RATIOS - Note A
  Gross profit to net sales. . . . . . . . .       29.7%     29.6%     28.7%     29.5%     30.9%     31.5%
  Income from continuing operations
     to net sales. . . . . . . . . . . . . .        4.9%      3.8%      3.1%      3.1%      4.6%      6.1%
  Effective income tax rate. . . . . . . . .       23.9%     29.4%     32.0%     39.8%     44.4%     45.6%
  Income from continuing operations
     to average shareholders'
     equity. . . . . . . . . . . . . . . . .       18.0%     14.2%     11.5%     11.8%     16.3%     18.2%
  Ratio of current assets to
     current liabilities . . . . . . . . . .      1.61:1    1.74:1    1.55:1    1.52:1    1.68:1    1.78:1
  Ratio of long-term debt to
     shareholders' equity plus
     long-term debt. . . . . . . . . . . . .       28.8%     33.4%     38.8%     40.9%     32.0%     34.9%
</TABLE>

Note A - Data for fiscal years 1986-1995 have been computed in accordance with
         Employers' Accounting for Pensions, SFAS No. 87.  Fiscal years
         1991-1995 have been computed in accordance with Employers' Accounting
         for Postretirement Benefits Other Than Pensions, SFAS No. 106.  Fiscal
         years 1992-1995 have been computed in accordance with Accounting for
         Income Taxes, SFAS No. 109.  Prior years have not been restated.
Note B - Based on weighted average number of shares outstanding adjusted for
         all subsequent share dividends.
Note C - Based on actual number of shares outstanding at end of period adjusted
         for all subsequent share dividends.





                                      -10-
<PAGE>   11
ITEM 6.    SELECTED FINANCIAL DATA

SUMMARY OF FINANCIAL DATA, 1985 - 1995
Commercial Intertech Corp. and Subsidiaries

<TABLE>
<CAPTION>
(in thousands, except per-share data and ratios)   1989      1988      1987      1986      1985
<S>                                              <C>       <C>       <C>       <C>       <C>
INCOME DATA - Note A
  Net sales. . . . . . . . . . . . . . . . .     $434,775  $398,666  $321,348  $274,510  $192,186
  Gross profit . . . . . . . . . . . . . . .      140,651   121,094   100,140    84,035    54,949
  Interest expense . . . . . . . . . . . . .        6,595     7,309     7,905     7,709     1,959
  Income from continuing operations
     before income taxes . . . . . . . . . .       44,433    30,586    19,265    18,369    16,742
  Income taxes . . . . . . . . . . . . . . .       20,314    13,822     8,041     7,753     8,826
  Income from continuing operations. . . . .       24,119    16,764    11,224    10,616     7,916
  Net income . . . . . . . . . . . . . . . .        6,730    16,564    11,224    10,616     7,916
Earnings per share - Note B
     Primary:
        Income from continuing operations. .         1.35      1.01       .68       .64       .48
        Net income . . . . . . . . . . . . .          .38       .99       .68       .64       .48
     Fully diluted:
        Income from continuing operations. .         1.30       .96       .67       .64       .48
        Net income . . . . . . . . . . . . .          .38       .95       .67       .64       .48
     Dividends per share of common stock:
     Cash. . . . . . . . . . . . . . . . . .          .40       .38       .37       .37       .35
     Stock . . . . . . . . . . . . . . . . .           --        --        --        --        --

OTHER FINANCIAL DATA - Note A
  Total assets . . . . . . . . . . . . . . .     $325,201  $308,388  $280,259  $271,449  $170,396
  Current assets . . . . . . . . . . . . . .      165,601   151,690   125,840   118,673   112,042
  Less current liabilities - . . . . . . . .       91,107    80,182    58,972    55,028    44,509
     Net working capital - . . . . . . . . .       74,494    71,508    66,868    63,645    67,533
  Net plant investment . . . . . . . . . . .      107,475   102,682   105,609   105,400    48,446
  Gross capital expenditures . . . . . . . .       17,783     9,995     9,889    13,553     5,739
  Long-term debt . . . . . . . . . . . . . .       41,481    60,225    72,371    83,356     3,922
  Redeemable preferred stock . . . . . . . .            0         0         0         0         0
  Shareholders' equity . . . . . . . . . . .      173,045   150,530   134,678   122,262   114,621
  Shareholders' equity per share -
     Note C. . . . . . . . . . . . . . . . .         9.09      9.08      8.17      7.43      6.98
  Actual number of shares outstanding
     at year-end . . . . . . . . . . . . . .       19,030    16,585    16,487    16,456    16,414
  Average number of shares outstanding
     during the year . . . . . . . . . . . .       17,852    16,664    16,565    16,493    16,403

RATIOS - Note A
  Gross profit to net sales. . . . . . . . .        32.4%     30.4%     31.2%     30.6%     28.6%
  Income from continuing operations
     to net sales. . . . . . . . . . . . . .         5.5%      4.2%      3.5%      3.9%      4.1%
  Effective income tax rate. . . . . . . . .        45.7%     45.2%     41.7%     42.2%     52.7%
  Income from continuing operations
     to average shareholders'
     equity. . . . . . . . . . . . . . . . .        14.9%     11.8%      8.7%      9.0%      7.0%
  Ratio of current assets to
     current liabilities . . . . . . . . . .       1.80:1    1.87:1    2.10:1    2.13:1    2.50:1
  Ratio of long-term debt to
     shareholders' equity plus
     long-term debt. . . . . . . . . . . . .        19.3%     28.6%     35.0%     40.5%      3.3%
</TABLE>

Note A - Data for fiscal years 1986-1995 have been computed in accordance with
         Employers' Accounting for Pensions, SFAS No. 87.  Fiscal years
         1991-1995 have been computed in accordance with Employers' Accounting
         for Postretirement Benefits Other Than Pensions, SFAS No. 106.  Fiscal
         years 1992-1995 have been computed in accordance with Accounting for
         Income Taxes, SFAS No. 109.  Prior years have not been restated.
Note B - Based on weighted average number of shares outstanding adjusted for
         all subsequent share dividends.
Note C - Based on actual number of shares outstanding at end of period adjusted
         for all subsequent share dividends.





                                      -11-
<PAGE>   12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
        OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        1993-1995


RESULTS OF OPERATIONS
---------------------

CONSOLIDATED RESULTS

         Continued strength in the U.S. economy and improved business
conditions for most of the overseas operations enabled the Corporation to
achieve record sales and earnings in 1995.  Income from continuing operations
of $30.4 million was 55 percent higher than last year's income of $19.6 million
and was more than double the $14.0 million reported in 1993.  Included in the
results for 1994 and 1993 are after-tax charges of $3.8 million and $0.6
million, respectively, to close and consolidate certain operations in Europe
and the U.S.  Net income in 1994 of $25.1 million includes a $5.5 million
noncash gain from the reversal of tax accruals no longer required in connection
with a discontinued operation.

         Record sales of $621.8 million were higher than those in 1994 and 1993
by 15 percent and 33 percent, respectively, after adjusting for the effects of
exchange rate differences on foreign sales reported in U.S. dollars.  Most of
this improvement resulted from increased volume as price increases have been
relatively modest over the three-year period.  Revenues for the Corporation's
U.S. operations advanced for the fourth consecutive year to an all-time high of
$329.4 million, surpassing those in 1994 and 1993 by 13 percent and 36 percent,
respectively. Domestic sales have increased substantially over this period for
the Hydraulic and Metal Product Groups while revenues in the Fluid Purification
segment have grown at more moderate rates. Export sales were up 10 percent over
last year, reflecting increased shipments to nonaffiliated customers in Canada,
Europe, Pacific Rim countries and the Middle East.  Domestic operations
accounted for 53 percent of the Company's total sales in 1995 versus 56 percent
in 1994 and 54 percent in 1993.  Revenues for the Company's overseas operations
increased by 17 percent over those in 1994 on a parity-adjusted basis.  Most of
the year-over-year gain occurred in Europe, Brazil, Australia and Southeast
Asia, reflecting increased demand for all of the Corporation's product lines
serving those regions.  Sales growth was less robust in Japan and the United
Kingdom where business conditions were somewhat weaker than in other countries.





                                      -12-
<PAGE>   13
ITEM 7.  (Continued)

CONSOLIDATED RESULTS (Continued)
--------------------------------

         Operating income of $45.3 million was higher than 1994 and 1993 by 30
percent and 78 percent, respectively, with record earnings being achieved by a
number of operating units from all three of the Company's major product groups.
Operating income for the Hydraulic Systems Group advanced for the fourth
consecutive year, while earnings were flat in the Metal Products segment where
significant gains in the domestic metal stamping divisions were negated by a
downturn in income for the Astron Division in Europe.  Year-over-year
improvements in most of the domestic and foreign operating units enabled the
Fluid Purification Group to reach its second highest annual operating income
since the acquisition in 1986.

         Included in operating income for 1995 and 1994 are the financial
results of the ORSTA Hydraulik operations which were acquired last year.
ORSTA, a manufacturer of hydraulic cylinders, piston pumps, and gear pumps,
consists of Sachsenhydraulik Chemnitz GmbH ("SHC") and its wholly owned
subsidiary, Hydraulik Rochlitz GmbH.  Shares of the business were acquired on
May 3, 1994 from the Truehandanstalt ("THA"), the regulatory agency of the
Federal Republic of Germany responsible for the privatization of former East
German state-owned enterprises.  Under terms of the Purchase Agreement,
Commercial Intertech tendered no financial consideration to acquire the shares
of SHC but received, in addition to the net assets of the two companies, cash
contributions from the THA to fund pre-existing capital investment programs and
cover estimated operating losses over a period of two years.  The loss
indemnification was recorded as a deferred credit (negative goodwill) and is
being amortized to income through cost of sales in accordance with a
predetermined schedule which coincides with projected losses in each fiscal
quarter over the two-year period. The combined German operations represented by
this acquisition incurred an operating loss of $2.2 million in 1995, after
amortization of the deferred credit, on sales of $35.8 million. The impact on
operating income in 1994 was negligible (see Note K for further details).





                                      -13-
<PAGE>   14
ITEM 7. (Continued)

INDUSTRY SEGMENTS
-----------------

         Following the acquisition of ORSTA Hydraulik during the latter half of
1994, the Corporation announced strategic plans to close certain Hydraulic
facilities in Europe and the United Kingdom, phase out some nonperforming
products manufactured at those facilities, and consolidate the remaining core
businesses with the newly acquired operations in Germany and other existing
operations located in the United Kingdom.  Included in cost of sales for 1994
are nonrecurring charges of $4.2 million for the separation of employees,
closure of facilities, writedown of unrecoverable fixed assets, and other
incremental costs necessary to complete this consolidation effort.  The program
is being executed in phases with two out of three segments having been
completed during 1995 and the final phase now scheduled for completion in early
1996.  Cash consumed thus far totals $2.3 million, while the remaining accrued
liability at the end of 1995 amounts to $1.4 million, principally representing
separation costs.  Accomplishment of this program is expected to improve the
Corporation's operating results over time through reduced employment costs,
more effective utilization of plant and equipment, and lower depreciation
expense.

- Hydraulic Systems

         The Hydraulic Systems segment accounted for 46 percent of the
Company's total sales and 55 percent of total operating income in 1995.
Revenues in this segment increased by $44.8 million or nearly 19 percent over
last year, while operating income as reported was higher by 21 percent.
Excluding the nonrecurring charges incurred in 1994, income was flat versus the
prior year as profitability was eroded in some of the domestic units by higher
material costs, expenses to re-engineer manufacturing processes and
administrative systems, general manufacturing inefficiencies from operating at
capacity levels, and costs incurred to develop and launch a new range of fluid
power components for the marine and automotive industries. Financial
performance was favorable in the foreign segment during 1995 with the exception
of operations in Germany which incurred a combined loss of $2.2 million for the
year.  Assimilation of these recently acquired businesses has been slower than
expected, and operating results were further reduced by one-time costs incurred
for plant rearrangement, relocation of the cylinder operations to a new
facility, and installation of equipment for the manufacture and assembly of a
new line of piston pumps. Additional programs were initiated during the year to
reorganize marketing and administrative functions, rationalize product
offerings, and operate the business more efficiently.  The combined results of
these efforts are expected to enable the German operations to reach the
breakeven point during the latter half of 1996.  Elsewhere, earnings improved
dramatically in the United Kingdom where the valve manufacturing unit located
in Grantham achieved record sales and income in 1995.  Results were





                                      -14-
<PAGE>   15
ITEM 7. Continued

Hydraulic Systems (Continued)


also significantly better for the Corporation's industrial and specialty
hydraulic product lines in the United Kingdom due, in part, to the benefits
derived from consolidating these businesses at the Warwick facility.  Increased
local demand and continued growth in export shipments to the Pacific Rim
enabled our subsidiary in Australia to post record sales and income this year.
Earnings improved moderately for the Brazilian operating unit, but business
conditions were adversely affected during the latter part of 1995 by government
measures to restrict economic growth and slow the rate of inflation.

         Capital expenditures amounted to $28.1 million for this segment in
1995 versus expenditures of $16.5 million in 1994 and $4.4 million in 1993.
Included in the total for the current year are expenditures of $9.4 million for
production equipment, facility upgrades, and new building construction at the
Chemnitz and Rochlitz facilities in Germany.  Funding for most of these
projects was provided by the THA in accordance with the terms of the purchase.
The majority of the remaining expenditures in 1995 pertains to ongoing
equipment purchases in the U.S. to upgrade manufacturing performance, increase
production capacity for future growth, and outfit specialized machining cells
for the manufacture of new products being introduced by the Oildyne Division.
Also included are expenditures for the construction of a new cylinder
manufacturing facility in Youngstown, Ohio.

         Incoming orders for the Hydraulic Systems Group held steady in the
fourth quarter of 1995 but were down 11 percent from the peak levels
experienced during the same period last year.   The backlog of unfilled orders
to start the new fiscal year was 2 percent higher than last year, after
adjusting for foreign currency differences, as surging activity among the
overseas units has counteracted a broad slowdown in business for the U.S.
operations.





                                      -15-
<PAGE>   16
ITEM 7. (Continued)

- Building Systems and Metal Products

         This segment accounted for 28 percent of the Company's total sales and
23 percent of total operating income in 1995.  Revenues for this group were up
substantially over 1994 and 1993, but operating income was flat over the
three-year period as progressive improvements in the domestic sector were
negated by a decline in overseas income.  Sales for the Astron Division were
higher than last year by 19 percent on a parity-adjusted basis, but earnings
diminished for the third consecutive year due to the combined effects of weak
industry prices, rising production costs, and price discounting in selected
markets to preserve share and stimulate demand.  Operating results were also
impacted by costs incurred to establish satellite manufacturing operations in
the Czech Republic and to expand Astron's business activities in China, Asia,
and other parts of Eastern Europe.  Operating income for this division was
lower than 1994 and 1993 by 41 percent and 51 percent, respectively.  Astron
incurred losses during the first half of 1995 but steadily improved upon
profitability in the third and fourth quarters as a result of increased selling
prices and stabilized material costs.  Business conditions were much stronger
for the metal stampings operations in the U.S.  where sales were higher than
those in 1994 and 1993 by 22 percent and 41 percent, respectively, reflecting
strong demand from customers in the transportation equipment and home building
industries.  Sales were further enhanced by the first quarter acquisition of a
small manufacturer of large diameter steel heads located in Saginaw, Texas.
Additionally, record sales were achieved again in 1995 by the division's
expanding Distribution Center program where revenue growth has averaged more
than 25 percent per annum in each of the three most recent fiscal periods.
Operating income for the combined metal stamping operations in the U.S. was
higher than 1994 and 1993 by  47 percent and 77 percent, respectively.

         Capital expenditures for this segment amounted to $3.6 million in 1995
versus spending of $2.7 million in 1994 and $1.8 million in 1993.  Nearly
two-thirds of the current year expenditures pertain to upgraded production
equipment, installation of a satellite manufacturing line in the Czech
Republic, and office automation for engineering and administrative functions in
the Astron Division.  The balance of the spending in 1995 related to
refurbishment of facilities and replacement of production equipment in the U.S.
General upgrading of Astron's facilities and production capabilities accounts
for the majority of the capital expenditures in 1994 and 1993.





                                      -16-
<PAGE>   17
ITEM 7. (Continued)

- Building Systems and Metal Products (Continued)

         Incoming orders for domestic operations in the fourth quarter were 10
percent lower than the same period last year, reflecting the general slowing of
the U.S. economy.  Bookings in the Astron Division, however, were up 11 percent
over those in the final quarter of 1994 on a parity-adjusted basis.  The
backlog of unfilled orders to start the new year is off 13 percent from a year
ago in the U.S., while the Astron backlog is higher by 39 percent after
adjusting for foreign currency differences.


-  FLUID PURIFICATION

         The Fluid Purification segment accounted for 26 percent of the
Company's total sales and 22 percent of total operating income in 1995.
Parity-adjusted sales for the group were higher than those in 1994 and 1993 by
9 percent and 17 percent, respectively.  A mild recovery in the chemical and
industrial processing industry segment during 1995 enabled the Process Division
to achieve moderate sales growth in the U.S., but business conditions remained
sluggish for the Consumer product line.  Sales for the combined overseas
operations were up 12 percent from the previous year on a parity-adjusted basis
with year-over-year growth occurring in all of the business units. Strong
performances by the overseas units and the Consumer Division in the U.S. pushed
operating income for the group to $9.9 million in 1995, representing an
increase of nearly 163 percent over the previous year.  Operating results
improved dramatically in the Consumer product line due, principally, to higher
prices and improved manufacturing efficiency.  Disposal of an unprofitable
product line late in 1994 further enhanced earnings in the current year for
this group's U.S. operations.  Elsewhere, operating income for Cuno Europe was
the highest in five years as a result of increased demand, concurrent gains in
manufacturing efficiencies, and stronger profit margins from changes
implemented in marketing and distribution strategies.  In Japan, the adverse
effects of price discounting to meet competitive challenges in the marketplace
were offset by low costs for imported material resulting from continued
weakness of the U.S. dollar throughout most of the year.  The Brazilian
operations were profitable in 1995, but business conditions deteriorated during
the latter half of the year as the government instituted fiscal policies
designed to restrict the economy and keep local inflation in check.





                                      -17-
<PAGE>   18
ITEM 7. (Continued)

Fluid Purification (Continued)

         Capital expenditures amounted to $5.7 million in 1995 versus spending
of $3.8 million in 1994 and $3.2 million in 1993.  Two-thirds of the total
spending over the three-year period pertains to investment in the U.S. for new
production equipment, environmental controls ($1.2 million in 1995 and $1.0
million in 1993), advanced testing equipment, and refurbishment of facilities.
Capital expenditures in the overseas units during this period primarily
consisted of upgraded computer capabilities, replacement of production
equipment, facility improvements, and office equipment.

         Incoming orders in the fourth quarter of 1995 were 6 percent higher
than the same period last year on a parity-adjusted basis. Bookings were
stronger in both the domestic and overseas segments.  The backlog of unfilled
orders to start the new year was 31 percent higher than last year for the
overseas units but was down 10 percent in the U.S.





                                      -18-
<PAGE>   19
ITEM 7. (Continued)

Nonoperating Income and Expense

         Interest received from investments increased from $1.4 million in 1994
to $2.0 million in 1995 due, primarily, to additional interest earned on cash
contributions from the THA in connection with last year's acquisition of ORSTA
Hydraulik. Investment yields were marginally higher than those in previous
periods.

         Approximately 72 percent of total interest expense incurred on
borrowed funds in 1995 resulted from long-term obligations. Most of the
long-term interest expense derives from the 1992 issuance of $45.0 million in
8.2 percent senior notes as part of a capital restructuring program.  Remaining
interest expense primarily pertains to long-term debt to fund major
construction projects completed in recent years, some equipment leases, and
short-term borrowings to support current operations.  Recorded as a credit to
interest expense in 1994 is a $1.3 million reversal of an unrealized interest
obligation accrued in prior years. Effective interest rates paid by the Company
on long-term debt were relatively unchanged over the three-year period, while
short-term rates have fluctuated on an interim basis.  The weighted average
rate was about the same over the most recent two-year period, but short-term
rates were generally lower at the end of 1995 versus rates which were available
earlier in the year.

         Foreign currency exchange and translation losses (principally in
Brazil) are included in other nonoperating expense for the three-year period
reported herein.  These amounts totaled $0.8 million in 1995, $2.8 million in
1994 and $0.7 million in 1993.  The Company utilizes foreign currency forward
contracts to hedge the principal and interest due on loans which are
periodically made with foreign subsidiaries.  Deferred gains or losses from
such hedging activities were negligible at the end of the current fiscal period
(see Note J).

         Other nonoperating expense for 1994 includes a $1.1 million loss
incurred on the fourth quarter sale of the Fluid Purification Group's
ultrafiltration product line located in the U.S.  Included in nonoperating
income for 1995, 1994 and 1993 are $0.3 million, $0.5 million and $1.0 million,
respectively, in technology license fees derived from a license agreement
entered into with Geoyang Development Co. Ltd. in 1993.  Under terms of the
agreement, Geoyang obtained the rights and technology necessary to design,
engineer, manufacture, market and assemble Astron's integrated metal building
systems in Korea.  Commercial Intertech will also receive royalties and fees on
buildings manufactured and sold by Geoyang in future periods.





                                      -19-
<PAGE>   20
ITEM 7.  (Continued)

Taxes

         The Company's effective tax rate was reduced to 24 percent in 1995 and
29 percent in 1994 primarily as the result of utilizing tax loss carryforwards
acquired with the ORSTA business in 1994 to shelter earnings of the Company's
other German operations, including those of an Astron subsidiary.  Remaining
ORSTA net operating losses of approximately $145.0 million, which may be
carried forward indefinitely, are expected to provide tax relief on income
earned by all operations in Germany for a number of years.  Effective rates for
the most recent two-year period were also reduced by the favorable tax impact
of reserve contracts and tax law changes which lowered the statutory rate for
two overseas subsidiaries.  Partially offsetting these benefits were higher tax
rates for some of the overseas operations, the tax consequences of repatriating
foreign earnings, state and local taxes levied on domestic income, and
nondeductible expense for goodwill acquired in purchase transactions prior to
July 25, 1991.

         The consolidated tax rate in 1993 was 32 percent as a result of
favorable conclusions to a number of open tax issues and the settlement of a
dispute with one foreign tax authority over deductibility of certain expenses.


ACCOUNTING STANDARDS

         In 1995, the Company adopted FASB Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of."  This Statement establishes accounting standards for the recognition,
measurement and reporting of impairments to long-lived assets, certain
intangibles and related goodwill when an entity is unable to recover the
carrying amounts of those assets.  No adjustments to financial results or
financial position were required as a result of the adoption.

         In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation" governing financial accounting and reporting
standards for compensation plans which award employees in the form of stock
options, restricted stock, performance shares, etc.  As permitted by this
Statement, the Company intends to continue to account for such compensation,
using the intrinsic value method in accordance with APB No. 25. Adoption of the
new standard in this form will have no impact on reported income in future
years.  Pro forma disclosures as required by this pronouncement will apply to
stock-based awards granted on or after November 1, 1995 and will first be
disclosed in financial statements for 1997.





                                      -20-
<PAGE>   21
ITEM 7. (Continued)

Accounting Standards

         In 1993, the Company adopted FASB Statement No. 112, "Employers'
Accounting for Postemployment Benefits."  This new accounting standard requires
accrual accounting for workers' compensation, disability, health insurance
continuation, severance pay and other postemployment benefits provided to
former or inactive employees when such benefits are attributable to service
rendered by the employee, the obligation vests or accumulates, and payment of
the obligation is probable.  The effect of adopting SFAS No. 112 was immaterial
to the financial statements as the Company was already accounting for such
costs on an accrual basis.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

         Liquidity is generally defined as the ability to generate cash, by
whatever means available, to satisfy the short-and-long-term needs of the
Company.  With respect to cash flow in 1995, the balance of cash and cash
equivalents decreased from $52.7 million at the end of 1994 to a total of $39.7
million at the end of the current period - a difference of $13.0 million.  A
significant portion of this change in cash position is attributable to the
ORSTA acquisition which was completed last year.  Under terms of the Purchase
Agreement, Commercial Intertech received cash contributions from the THA and
other German regulatory agencies in the form of bank deposits, installment
payments, and investment grants and subsidies to cover operating losses for a
period of two years and fund pre-existing capital expenditure programs of the
acquired businesses in Chemnitz and Rochlitz (see Note K).  Contributions
received since the acquisition date in accordance with the Agreement have
amounted to $47.1 million, while cash consumed for operating requirements
(inclusive of working capital needs) and capital investments has amounted to
$27.6 million and $14.5 million, respectively.  The timing of the related
receipts and disbursements over the two-year period has been such, however,
that the ORSTA operations generated a net cash inflow of $14.3 million in 1994
but consumed $9.3 million in cash during the current year.

         Cash generated from Commercial Intertech's total operating activities
amounted to $20.3 million in 1995, representing a decrease of $12.1 million or
37 percent from the previous year. Increased working capital to support the
global surge in business and cash requirements for the ORSTA operations at
Chemnitz and Rochlitz were the principal factors in the year-over-year decline.
Income from discontinued operations in 1994 of $5.5 million was noncash in
nature and therefore had no effect on cash flow in this fiscal period.





                                      -21-
<PAGE>   22
ITEM 7.  (Continued)

LIQUIDITY AND CAPITAL RESOURCES (Continued)
-------------------------------------------

         With respect to investing activities, cash contributions received in
connection with the ORSTA acquisition amounted to $17.1 million in 1995 versus
$30.0 million in related receipts during the prior period.  Capital
expenditures in 1995 were a record $37.0 million for the Corporation versus
spending of $22.4 million in 1994 and $9.6 million in 1993.  Nearly 60 percent
of the current year spending pertained to investment in the U.S. for expansion
of production capacity, equipment upgrades to improve manufacturing
performance, installation of emission control devices, construction of a new
manufacturing facility, machine tools for the manufacture of new product
offerings, and purchase of advanced computer systems to support manufacturing
processes and administrative functions. Construction of a new manufacturing
facility, investment in technologically advanced production equipment, and
other operating improvements for the ORSTA units accounted for most of the
capital spending in the overseas segment during 1995. Capacity expansion,
equipment upgrades, emission controls and office automation in the U.S.
accounted for the majority of the capital expenditures in the two preceding
years. Authorized but unspent capital expenditure programs totaled $24.8
million at fiscal year-end.  Significant projects authorized for 1996 include
ongoing investment in state-of-the-art production equipment for Hydraulic
Systems facilities in the U.S. and United Kingdom, the remainder of the funded
building construction and equipment purchase programs for hydraulic operations
in Germany, a major expansion of Astron's satellite manufacturing capabilities
in the Czech Republic, and upgraded production capabilities for the Fluid
Purification Group.

         Cash used in financing activities totaled $14.8 million in 1995.
Principal activities included the retirement of debt, payment of reserve
contract premiums, and the distribution of dividends to shareholders.
Dividends totaled $9.7 million in 1995, of which $7.9 million was paid to
shareholders of common stock.  During the year, quarterly cash dividends on
common stock were raised to $.135 per share, up 8 percent from the previous
rate of $.125 per share.

         A refinancing program was completed in 1992 whereby proceeds from
issuance of $45.0 million in 8.2 percent senior notes were used to redeem all
of the Series C senior increasing rate cumulative convertible preferred shares
originally issued in 1990.  Principal payments against the senior notes are
scheduled to commence in 1997 with the final payment to be made in 2002. The
impact of the refinancing has improved cash flow and increased net income
available to shareholders of common stock.





                                      -22-
<PAGE>   23
ITEM 7.  (Continued)

         As part of a restructuring program completed in 1990, the Company
established two leveraged employee stock ownership plans (the ESOPs) and sold
Series B cumulative convertible preferred shares to the plans for approximately
$25.0 million.  The ESOPs borrowed funds to purchase the Series B shares.
During 1993, the ESOPs completed a refinancing program whereby a floating rate
loan was replaced with a $23.2 million, 7.08 percent, 17-year term loan
privately placed with a group of insurance companies. This program provided
permanent financing for the remaining life of the benefit plan.  The Company
has guaranteed the repayment of any remaining principal as of December 31,
2009.  The outstanding loan balance at October 31, 1995 was approximately $21.7
million.

         Internal cash flows are expected to be sufficient to provide the
capital resources necessary to support operating needs and finance capital
expenditure programs in the coming year.  The Company has a $35.0 million
nonreducing credit facility available from a group of lending institutions
which expires in 1997.  The funds available to the Company under this agreement
may be used for any general corporate purpose.  Including this facility, total
unused credit lines of $131.4 million, denominated in both domestic and foreign
currencies, were available to the Company at fiscal year-end.  Borrowing rates
to start the new year were generally lower than the same period a year ago,
reflecting prevailing market conditions.


IMPACT OF INFLATION AND CHANGING PRICES
---------------------------------------

         Rates of inflation were moderately higher than the previous year,
ranging from 2 to 4 percent in most instances. Manufacturing and operating
costs generally advanced in line with inflation, but material cost increases
outpaced the rate of inflation in most product lines.  Selling price increases
were implemented to cover rising costs for wages, benefits, raw materials,
purchased components and other manufacturing costs, but the continuing trend of
competitive pressures and price resistance in the marketplace limited the
extent to which cost increases could be passed along to customers in 1995.
Consequently, the Corporation relied upon volumetric efficiencies, productivity
improvements and cost saving measures to offset the shortfall in pricing and
successfully maintain or improve profit margins in most business units.
Margins were lower, however, for the Astron Division where weak industry prices
and price discounting in certain market segments have adversely affected
profitability over the past three years.

         The ability to recover cost increases and maintain margins continues
to be a major  challenge for most operating units,  and the Company relies upon
cost containment, aggressive purchasing, quality initiatives and cost-saving
capital investments to combat profit erosion and remain competitive.





                                      -23-
<PAGE>   24
ITEM 7.  (CONTINUED)

BUSINESS OUTLOOK
----------------

         The consolidated backlog of unfilled orders amounted to $169.5 million
at the end of the year which, after adjusting for the effects of exchange rate
differences on foreign segments, represents an 8 percent increase over the
previous fiscal year-end.  Ending backlogs were particularly strong for the
overseas operations, up 35 percent, but were down 14 percent from the peak
levels experienced last year  in the domestic sector. Substantially all of the
consolidated backlog is deliverable in 1996.

         Business conditions to start the new fiscal year for the Company's
domestic operations are generally weaker than a year ago as demand was lower
from customers in certain industry segments during the final quarter of 1995.
Recent reports suggest that economic growth in the U.S. slowed during the
latter part of the year and that prospects for an upturn in 1996 will depend,
heavily, on the outcome of the government's efforts to forge a
deficit-reduction program and the Federal Reserve's reaction to that program in
setting fiscal policy.  Economists are generally predicting a sluggish
performance by the U.S. economy early in 1996, followed by lower interest rates
and modest economic growth over the latter part of the year.  First quarter
earnings for the Company's domestic operations are expected to be lower than
the record-setting results achieved for the same period in 1995, but profit
improvements are nevertheless anticipated for all three of our U.S.  product
groups in 1996. During the coming year, the Company intends to implement
marketing strategies which will expand the customer base and increase share,
invest in capital equipment to increase production capacity and improve
manufacturing performance, introduce new product offerings, and continue to
pursue business acquisitions which will complement existing product lines and
allow access to new market segments.

         Prospects are mixed for the Company's overseas operations to start the
year.  Ongoing efforts to reorganize and make profitable the hydraulic
operations in Germany will adversely impact earnings during the early part of
1996, while a weakening economic trend has prompted customers in the United
Kingdom to alter order patterns and reschedule deliveries in some instances.
Conditions are much brighter for the Astron Division, however, where results
are expected to be much better in the coming year as a result of improving
economies in Central Europe, a favorable trend in product pricing, and
continuing efforts to expand business activities in the former Eastern Bloc.
Elsewhere, the outlook is excellent for continued economic growth in Australia
and Southeast Asia where strong performances are anticipated again for our
Hydraulic and Fluid Purification operations located in that region.
Year-over-year improvements are also likely for operations in Brazil, pending
success of the local government to restart the economy and stimulate business
growth.





                                      -24-
<PAGE>   25
ITEM 7.  (Continued)

         The Company continues to invest in capital improvements, identify and
implement strategic initiatives, and reduce overheads where possible to lower
operating costs and improve profitability.  The competitive advantages which
these programs provide, our ability to meet the challenges of globalization and
increased international competition, and continuation of moderate growth in
world economies cause us to anticipate strong consolidated results again for
1996.





                                      -25-
<PAGE>   26


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

STATEMENTS OF CONSOLIDATED INCOME
Commercial Intertech Corp. and Subsidiaries
<TABLE>
<CAPTION>
                                               Year Ended October 31,
                                             1995       1994       1993
                                             --------------------------
                                        (in thousands, except per-share data)
<S>                                                  <C>
Net sales. . . . . . . . . . . . . . . .  $621,836    $516,931   $448,577
Less costs and expenses:
   Cost of products sold . . . . . . . .   436,857     363,701    319,697
   Selling, administrative and general
      expenses . . . . . . . . . . . . .   139,729     118,401    103,510
                                                                          
                                          ---------   ---------  ---------
                                           576,586     482,102    423,207 
                                          ---------   ---------  ---------
Operating income . . . . . . . . . . . .    45,250      34,829     25,370

Nonoperating income (expense):
   Interest income . . . . . . . . . . .     1,966       1,393      1,047
   Interest expense. . . . . . . . . . .    (6,912)     (4,952)    (5,744)
   Other . . . . . . . . . . . . . . . .      (362)     (3,467)       (71)
                                          ---------   ---------  ---------
                                            (5,308)     (7,026)    (4,768)
                                          ---------   ---------  ---------
Income from continuing operations before
   income taxes. . . . . . . . . . . . .    39,942      27,803     20,602

Provision for income taxes:
   Current . . . . . . . . . . . . . . .    10,404       9,949      8,794
   Deferred. . . . . . . . . . . . . . .      (845)     (1,765)    (2,207)
                                          ---------   ---------  ---------
                                             9,559       8,184      6,587 
                                          ---------   ---------  ---------
Income from continuing operations. . . .    30,383      19,619     14,015

Income from discontinued operation . . .         0       5,462          0 
                                          ---------   ---------  ---------

Net income . . . . . . . . . . . . . . .  $ 30,383    $ 25,081   $ 14,015   
                                          =========   =========  =========  
Preferred stock dividends and adjustments.  (2,084)     (2,097)    (2,109)
                                          ---------   ---------  ---------
Net income applicable to common stock. .  $ 28,299    $ 22,984   $ 11,906   
                                          =========   =========  =========  
Earnings per share of common stock:
   Primary:
      Income from continuing operations      $1.82       $1.14      $0.79
      Net income . . . . . . . . . . . .      1.82        1.50       0.79

   Fully diluted:
      Income from continuing operations.     $1.72       $1.09      $0.76
      Net income . . . . . . . . . . . .      1.72        1.41       0.76
</TABLE>

See notes to consolidated financial statements.




                                      
                                     -26-
<PAGE>   27
ITEM 8. (Continued)

CONSOLIDATED BALANCE SHEETS
Commercial Intertech Corp. and Subsidiaries



<TABLE>
<CAPTION>
                                                  October 31,  October 31,
                                                     1995         1994    
                                                  ------------------------
Assets                                                 (in thousands)
<S>                                               <C>            <C>
CURRENT ASSETS
   Cash (including equivalents of $ 25,237,000
       in 1995 and $37,073,000 in 1994 . . . .    $ 39,689       $ 52,666
   Accounts and notes receivable, less
      allowances for doubtful accounts of
      $ 3,442,000 in 1995 and $2,890,000 in
      1994 . . . . . . . . . . . . . . . . . .     114,921         94,212
   Inventories . . . . . . . . . . . . . . . .      73,482         62,320
   Deferred income tax benefits. . . . . . . .      17,405         15,307
   Prepaid expenses and other current assets .       7,523         10,861
                                                  ---------      --------

      Total current assets . . . . . . . . . .     253,020        235,366

NONCURRENT ASSETS
   Intangible assets . . . . . . . . . . . . .      23,761         26,563
   Pension assets. . . . . . . . . . . . . . .      35,742         31,191
   Other noncurrent assets . . . . . . . . . .       4,607          4,421
                                                  ---------      --------

      Total noncurrent assets. . . . . . . . .      64,110         62,175

PROPERTY, PLANT AND EQUIPMENT
   Land and land improvements. . . . . . . . .      14,073         13,571
   Buildings . . . . . . . . . . . . . . . . .      73,233         66,194
   Machinery and equipment . . . . . . . . . .     178,482        164,069
   Construction in progress. . . . . . . . . .      14,648         10,056
                                                  ---------      --------

                                                   280,436        253,890

   Less allowances for depreciation and
   amortization. . . . . . . . . . . . . . . .     137,710        128,453
                                                  ---------      --------

                                                   142,726        125,437
                                                  ---------      --------

Total assets . . . . . . . . . . . . . . . . .    $459,856       $422,978     
                                                  ========       ========     
</TABLE>





                                     -27-
<PAGE>   28
ITEM 8. (Continued)
CONSOLIDATED BALANCE SHEETS (Continued)


<TABLE>
<CAPTION>
                                                   October 31,  October 31,
                                                      1995         1994    
                                                   ------------------------
                                                         (in thousands)
<S>                                                <C>           <C>
Liabilities and Shareholders' Equity

CURRENT LIABILITIES
   Bank loans. . . . . . . . . . . . . . . . . .   $ 19,725      $ 20,273
   Accounts payable. . . . . . . . . . . . . . .     58,477        44,489
   Accrued payrolls and related taxes. . . . . .     29,010        22,168
   Accrued expenses. . . . . . . . . . . . . . .     38,742        40,669
   Dividends payable . . . . . . . . . . . . . .      2,788         2,509
   Accrued income taxes. . . . . . . . . . . . .      6,163         2,037
   Current portion of long-term debt . . . . . .      2,269         2,821
                                                   ---------     --------

      Total current liabilities. . . . . . . . .    157,174       134,966

NONCURRENT LIABILITIES
   Long-term debt. . . . . . . . . . . . . . . .     73,929        77,020
   Deferred income taxes . . . . . . . . . . . .     18,179        16,926
   Postretirement benefits . . . . . . . . . . .     23,711        21,188
   Deferred credit . . . . . . . . . . . . . . .      3,731        19,118
                                                   ---------     --------

      Total noncurrent liabilities . . . . . . .    119,550       134,252


SHAREHOLDERS' EQUITY
   Preferred stock, no par value:
      Authorized:  10,000,000 shares
      Series A participating preferred
         shares. . . . . . . . . . . . . . . . .          0             0
      Series B ESOP convertible preferred shares
         Issued: 1995 - 1,053,508 shares
                 1994 - 1,059,407 shares . . . .     24,494        24,631
   Common stock, $1 par value:
      Authorized:  30,000,000 shares
      Issued:
         1995 - 15,439,514 shares;
         (excluding 149,043 in treasury)
         1994 - 15,199,258 shares;
         (excluding 144,261 in treasury) . . . .     15,440        15,199
   Capital surplus . . . . . . . . . . . . . . .     38,396        35,844
   Retained earnings . . . . . . . . . . . . . .    112,907        91,649
   Deferred compensation . . . . . . . . . . . .    (18,851)      (20,108)
   Translation adjustment. . . . . . . . . . . .     10,746         6,545 
                                                   ---------     ---------

                                                    183,132       153,760 
                                                   ---------     ---------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $459,856      $422,978    
                                                   =========     =========   
</TABLE>


See notes to consolidated financial statements.





                                     -28-
<PAGE>   29
ITEM 8.  (Continued)

STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
Commercial Intertech Corp. and Subsidiaries
<TABLE>
<CAPTION>
                                                Year Ended October 31,
                                              1995       1994       1993
                                              --------------------------
                                        (in thousands, except per-share data)
<S>                                         <C>       <C>         <C>
PREFERRED STOCK (Series B)                                        
   Balance at beginning of year. . . . .    $ 24,631   $ 24,758   $ 24,886
   Shares converted. . . . . . . . . . .        (137)      (127)      (128)
                                            ---------  ---------  ---------
   Balance at end of year. . . . . . . .      24,494     24,631     24,758

COMMON STOCK
   Balance at beginning of year. . . . .      15,199     10,038      9,910
   Shares issued:
      Employee Stock Ownership Plan. . .          34         25         23
      Stock option and award plans . . .         207         63        105
   Shares issued as of September 1, 1994
      in stock split effected in the form
      of a 50% share dividend. . . . . .           0      5,073          0 
                                            ---------  ---------  ---------
   Balance at end of year. . . . . . . .      15,440     15,199     10,038

CAPITAL SURPLUS
   Balance at beginning of year. . . . .      35,844     39,034     37,628
   Employee Stock Ownership Plan . . . .         631        112        419
   Stock option and award plans. . . . .       1,921      1,771        987
   Par value transferred to common stock
      in connection with stock split
      effected in form of share dividend           0     (5,073)         0
                                                                           
                                            ---------  ---------  ---------
   Balance at end of year. . . . . . . .      38,396     35,844     39,034

RETAINED EARNINGS
   Balance at beginning of year. . . . .      91,649     75,087     69,199
   Net income for the year . . . . . . .      30,383     25,081     14,015 
                                            ---------  ---------  ---------
                                             122,032    100,168     83,214

   Dividends:
      Common (per share:  1995 - $0.51;
         1994 - $0.48; 1993 - $0.45) . .       7,862      7,239      6,821
      Preferred Series B . . . . . . . .       2,082      2,095      2,107 
                                            ---------  ---------  ---------
                                               9,944      9,334      8,928
   Other preferred stock adjustments . .        (819)      (815)      (801)
                                            ---------  ---------  ---------
   Balance at end of year. . . . . . . .     112,907     91,649     75,087

DEFERRED COMPENSATION. . . . . . . . . .     (18,851)   (20,108)   (21,248)

TRANSLATION ADJUSTMENT . . . . . . . . .      10,746      6,545     (4,732)
                                            ---------  ---------  ---------

      Total shareholders' equity . . . .    $183,132   $153,760   $122,937   
                                            =========  =========  =========  


Shareholders' equity per share of common
   stock . . . . . . . . . . . . . . . .      $11.50      $9.82      $7.93
</TABLE>

See notes to consolidated financial statements.


                                     -29-
<PAGE>   30
ITEM 8.  (Continued)

STATEMENTS OF CONSOLIDATED CASH FLOWS
Commercial Intertech Corp. and Subsidiaries
<TABLE>
<CAPTION>
                                                   Year Ended October 31,
                                                  1995      1994      1993
                                                  ------------------------
OPERATING ACTIVITIES:                                   (in thousands)
<S>                                             <C>       <C>       <C>
   Net income . . . . . . . . . . . . . . . . . $ 30,383  $ 25,081  $ 14,015
   Adjustments to reconcile net income to net
      cash provided by operating activities:
         Provision for depreciation and
            amortization. . . . . . . . . . . .   19,205    17,962    16,764
         Discontinued operation . . . . . . . .        0    (5,462)        0
         Amortization of deferred credit. . . .  (16,095)   (6,466)        0
         Postretirement benefits. . . . . . . .      634       383       781
         Pension plan credits . . . . . . . . .   (1,853)   (2,531)   (2,386)
         Change in deferred income taxes. . . .     (944)   (2,026)   (1,615)
         Change in current assets and liabilities:
            (Increase) decrease in accounts
               receivable . . . . . . . . . . .  (19,838)   (4,615)      138
            (Increase) decrease in inventories.   (9,709)   (4,475)    2,349
            (Increase) in prepaid expenses
               and other current assets . . . .   (3,135)   (1,020)   (1,332)
            Increase in accounts payable and
               accrued expenses . . . . . . . .   16,022    21,597     7,688
            Increase (decrease) in accrued
               income taxes . . . . . . . . . .    5,605    (6,072)     (143)
                                                --------- --------- ---------
               Net cash provided by operating
                  activities. . . . . . . . . .   20,275    32,356    36,259

INVESTING ACTIVITIES:
   Proceeds from sale of fixed assets . . . . .      487       284       340
   Business acquisition . . . . . . . . . . . .     (886)        0         0
   Cash and cash equivalents acquired in
      business acquisition. . . . . . . . . . .        0    11,140         0
   Installments received - acquisition. . . . .   17,146    18,833         0
   Investment in intangibles. . . . . . . . . .     (389)     (450)     (496)
   Capital expenditures . . . . . . . . . . . .  (37,028)  (22,373)   (9,583)
                                                --------- --------- ---------
        Net cash (used) provided by investing
           activities. . . . . . . . . .  . . .  (20,670)    7,434    (9,739)
FINANCING ACTIVITIES:
   Proceeds from long-term debt . . . . . . . .    4,012         0     1,548
   Principal payments on long-term debt . . . .   (7,700)   (2,897)   (8,114)
   Net borrowings under bank loan agreements. .      629    (2,237)   (1,034)
   Proceeds from reserve contracts. . . . . . .    2,089       830       631
   Purchase of reserve contracts. . . . . . . .   (3,475)   (3,430)   (2,503)
   Conversion of other assets . . . . . . . . .     (660)      653      (817)
   Dividends paid . . . . . . . . . . . . . . .   (9,666)   (9,094)   (8,872)
                                                --------- --------- ---------
        Net cash (used) by financing activities  (14,771)  (16,175)  (19,161)

Effect of exchange rate changes on cash . . . .    2,189     3,985    (1,689)
                                                --------- --------- ---------
Net (decrease)increase in cash and cash
     equivalents. . . . . . . . . . . . . . . .  (12,977)   27,600     5,670
Cash and cash equivalents at beginning of year.   52,666    25,066    19,396 
                                                --------- --------- ---------
Cash and cash equivalents at end of year. . . . $ 39,689  $ 52,666  $ 25,066 
                                                ========= ========= =========

Cash paid during the year for:
   Interest . . . . . . . . . . . . . . . . . .   $7,055    $6,162    $6,032
   Income taxes . . . . . . . . . . . . . . . .    4,899    16,282     8,344
</TABLE>

See notes to consolidated financial statements.





                                     -30-
<PAGE>   31
ITEM 8.  (Continued)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Commercial Intertech Corp. and Subsidiaries


NOTE A - ACCOUNTING POLICIES


Consolidation:
     The accounts of the Company and all of its subsidiaries
are included in the consolidated financial statements.  All intercompany
accounts and transactions are eliminated upon consolidation.  Certain amounts
in the consolidated financial statements for prior years have been reclassified
to conform to the current presentation.


Inventories:
     Inventories are stated at the lower of cost or market.  Inventories in the
United States are primarily valued on the last-in, first-out (LIFO) cost
method.  The method used for all other inventories is first-in, first-out
(FIFO).  Approximately 51 percent (56 percent in 1994) of worldwide inventories
are  accounted for using the LIFO method.    Inventories as of October 31
consisted of the following:

<TABLE>
<CAPTION>
                                            1995      1994
                                            ----      ----
                                            (in thousands)
       <S>                                <C>       <C>
       Raw materials . . . . . . . .      $17,982   $15,393
       Work in process . . . . . . .       34,461    31,188
       Finished goods. . . . . . . .       21,039    15,739
                                          -------   -------
                                          $73,482   $62,320  
                                          =======   =======  
</TABLE>

     If all inventories were priced using the FIFO method, which approximates
replacement cost, inventories would have been $16,591,000 higher in 1995 and
$15,510,000 higher in 1994.

Intangibles:
     Intangible assets at October 31 are summarized as follows:

<TABLE>
<CAPTION>
                                            1995      1994
                                            ----      ----
                                            (in thousands)
     <S>                                 <C>        <C>
     Goodwill, less accumulated
        amortization (1995 - $5,856,000;
           1994 - $5,088,000)  . . . . .  $17,829   $18,331
     Other intangibles, less accumulated
        amortization (1995 - $22,652,000;
           1994 - $20,249,000) . . . . . .  5,932     8,232
                                          -------   -------
                                          $23,761   $26,563  
                                          =======   =======  
</TABLE>




                                      
                                     -31-
<PAGE>   32
ITEM 8. (Continued)

NOTE A - ACCOUNTING POLICIES (Continued)

     Excess cost over the fair value of net assets acquired (or goodwill)
generally is amortized on a straight-line basis over 40 years.  The carrying
value of goodwill is reviewed if facts and circumstances suggest that it may be
impaired.  If this review indicates that goodwill will not be recoverable, as
determined on the estimated undiscounted cash flows of the entity acquired over
the remaining amortization period, the Company's carrying value of the goodwill
is reduced by the estimated shortfall of cash flows.  In addition, the Company
assesses long-lived assets for impairment under Financial Accounting Standards
Board Statement No. 121.  Under those rules, goodwill associated with assets
acquired in a purchase business combination is included in impairment
evaluations when events or circumstances exist that indicate the carrying
amount of those assets may not be recoverable.

     Other intangibles, including patents, know-how and trademarks, are carried
at their appraised value on the acquisition date less accumulated amortization,
which is provided using the straight-line method over 10 to 25 years.

     Deferred credit represents negative goodwill from an acquisition (see Note
K).

Properties and Depreciation:
     Property, plant and equipment are recorded at cost.  Buildings and
equipment are depreciated over their useful lives, principally by use of the
straight-line method.

Income Taxes:
     The Company uses the liability method as required by Statement of
Financial Accounting Standards No. 109 in measuring the provision for income
taxes and recognizing deferred tax assets and liabilities on the balance sheet.
Deferred income tax assets and liabilities principally arise from differences
between the tax basis of the asset or liability and its reported amount in the
consolidated financial statements.  These include inventory valuation
differences under uniform capitalization rules, depreciation expense, accrued
expenses, postretirement benefit expenses, net operating loss carryforwards and
a gain on the sale of property in the United Kingdom.  Deferred tax balances
are determined by using provisions of the enacted tax laws; the effects of
future changes in tax laws or rates are not anticipated.




                                      
                                     -32-
<PAGE>   33
ITEM 8.  (Continued)

NOTE A - ACCOUNTING POLICIES (Continued)

     Provisions are made for appropriate income taxes on undistributed earnings
of foreign subsidiaries which are expected to be remitted to the parent company
in the near term.  The cumulative amount of unremitted earnings of
subsidiaries, which aggregated approximately $70,794,000 at October 31, 1995,
is deemed to be indefinitely reinvested and, accordingly, no provision for U.S.
federal and state income taxes has been provided thereon.  Upon distribution of
those earnings in the form of dividends or otherwise, the Company would be
subject to both U.S. income taxes (subject to an adjustment for foreign tax
credits) and withholding taxes payable to the various foreign countries.
Determination of the amount of unrecognized deferred U.S. tax liability is not
practicable because of the complexities associated with its hypothetical
calculation; however, unrecognized foreign tax credit carryforwards would be
available to reduce some portion of the U.S. liability.

Translation of Foreign Currencies:
     The financial statements of foreign entities are translated in accordance
with Financial Accounting Standards Board (FASB) Statement No.  52, except for
those entities located in highly inflationary countries.  Under this method,
revenue and expense accounts are translated at the average exchange rate for
the year while all assets and liability accounts are translated into U.S.
dollars at the current exchange rate.  Resulting translation adjustments are
recorded as a separate component of shareholders' equity and do not affect
income determination.

Earnings Per-Share Amounts:
     The Company's Board of Directors approved a three-for-two split in July
1994 of the Company's common stock in the form of a 50 percent share dividend.
The par value of each share was not changed from $1.  Accordingly, all per
share and stock option data have been restated to reflect the split.  In
connection with the split, common stock was credited and capital surplus was
charged for the aggregate par value of the shares that were issued.

     Income per share of common stock is computed using the weighted-average
number of shares outstanding for each year after giving retroactive effect to
the 1994 share dividend.  The preferred stock issuances were determined not to
be common stock equivalents for primary earnings per common share.  In
computing primary earnings per common share, the Series B preferred dividends
reduce income available to common shareholders.




                                      
                                     -33-
<PAGE>   34
ITEM 8.  (Continued)

NOTE A - ACCOUNTING POLICIES (Continued)

     In computing fully diluted earnings per share, dilution is determined by
dividing net earnings by the weighted average number of common shares
outstanding during each year adjusted for the 1994 share dividend after giving
effect to dilutive preferred stock assumed converted to common stock.  The
dilutive calculation assumes conversion of Series B preferred stock to common
shares and the subsequent adjustment for dividend rates to arrive at income
available to common shareholders.

Cash Equivalents:
     The Company considers all highly liquid investments with a maturity of
three months or less, when purchased, to be cash equivalents.

Investment in Reserve Contracts:
     The Company holds corporate owned life insurance contracts on all domestic
employees.  The contracts are recorded at cash surrender value, net of policy
loans, in Other Assets.  The net contract expense, including interest expense,
is included in Selling, Administrative and General Expenses in the Statements
of Consolidated Income.  The related interest expense was $7,973,000  in 1995,
$6,320,000 in 1994, and $3,660,000 in 1993 which in each year is reduced for
contract benefits and net amortization of contract premiums and cash surrender
value.

Revenue Recognition:
     Revenue is recognized when the earning process is complete and the risks
and rewards of ownership have transferred to the customer, which is generally
considered to have occurred upon shipment of the finished product.

Advertising:
     The Company expenses all advertising cost as incurred.  Advertising
expense incurred during the period was immaterial.


Newly Issued Accounting Standards:
     In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" (SFAS No. 121), was issued.  The Company adopted SFAS No.
121 during fiscal 1995.  There was no impact on the Company's financial results
or position. SFAS No. 121 requires companies to review long-lived assets and
certain identifiable intangibles to be held and used for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable.





                                     -34-
<PAGE>   35
ITEM 8.  (Continued)

NOTE A - ACCOUNTING POLICIES (Continued)


     In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," was issued.  As permitted by this
statement, the Company intends to continue to account for such compensation,
using the intrinsic value method in accordance with APB No. 25.  Adoption of
the new standard in this form will have no impact on reported income in future
years.  Pro forma disclosures as required by this pronouncement will apply to
stock-based awards granted on or after November 1, 1995 and will first be
disclosed in financial statements for 1997.




                                      
                                     -35-
<PAGE>   36
ITEM 8.  (Continued)

NOTE B - DEBT

Long-term debt obligations are summarized below:

<TABLE>
<CAPTION>
                                            1995      1994
                                            ----      ----
                                            (in thousands)
<S>                                       <C>       <C>
Senior notes . . . . . . . . . . . . .    $45,000   $45,000
Industrial revenue loans . . . . . . .      3,533     4,225
Mortgages. . . . . . . . . . . . . . .      4,973     5,868
Other. . . . . . . . . . . . . . . . .      1,010     2,265
                                          -------   -------
                                           54,516    57,358
Less current portion . . . . . . . . .      2,269     2,821
                                          -------   -------
                                           52,247    54,537
Guarantee of employee stock ownership
   plan loan . . . . . . . . . . . . .     21,682    22,483
                                          -------   -------
                                          $73,929   $77,020   
                                          =======   =======   
</TABLE>

     The Company has outstanding $45 million of 8.20 percent senior notes due
in 2002, privately placed with a group of insurance companies.  The notes have
level annual sinking fund payments beginning in April 1997.  The senior notes
include covenants which require the maintenance of certain financial ratios.
The Company was in compliance with these covenants at October 31, 1995.

     The Company maintains a $35 million nonreducing revolving credit facility
with a group of three banks.  There were no borrowings outstanding from this
facility at October 31, 1995 or 1994.  The funds available under the agreement
may be used for any general corporate purposes, including share purchases.  The
Company pays a facility fee of 0.25 percent per annum on the total commitment.
The revolving credit portion of the agreement has interest options determinable
by the Company based upon LIBOR, certificate of deposit or prime interest
rates.  The maximum rate is prime rate, 7/8 percentage point over LIBOR or one
percentage point over certificate of deposit rates.  The credit agreement also
has a competitive bid option feature, which under certain conditions provides
lower interest rates.  The credit agreement includes covenants which require
the maintenance of certain financial ratios.  The Company was in compliance
with these covenants at October 31, 1995.  Additionally, under the most
restrictive provisions of the agreement, approximately $23.5 million of
unrestricted retained earnings is available for future dividend payments or
share purchases.  During 1994 the agreement was extended two years and will
expire April 1997.





                                     -36-
<PAGE>   37
ITEM 8.  (Continued)

NOTE B - DEBT (Continued)


     Industrial revenue loans cover two separate domestic expansion programs
and have maturities to January 1, 2001.  Interest costs currently range from
6.825 to 7.75 percent, and the loans are secured by property and equipment at
the Benton, Arkansas and Hicksville, Ohio facilities (net book value at October
31, 1995 - $5,340,000).

     Mortgages relate to construction programs at two facilities.  The three
loans collateralized with a Japanese facility were replaced during fiscal 1995
with two loans that bear interest at 1.75 and 1.88 percent, maturing through
the year 2000.  One of the two loans is secured with property and equipment at
Kita-Ibaragi, Japan (net book value at October 31, 1995 - $6,395,000).  The
second loan is unsecured.  The loan for the second program is collateralized by
a facility located in Enfield, Connecticut and bears interest at 5.0 percent,
also maturing in the year 2000.  The Enfield facility's net book value at
October 31, 1995 was $4,062,000.

     The Company established the Employee Stock Ownership Plan (ESOP) in
February 1990.  The ESOP is presently financed by 7.08 percent senior notes due
December 31, 2009, privately placed with a group of insurance companies.  Since
the debt is guaranteed by the Company, it is included in Long-Term Debt with an
offset recorded as Deferred Compensation in Shareholders' Equity.  As Company
contributions and dividends on the shares held by the ESOP are used to meet
interest and principal payments, shares are released for allocation to eligible
employees.

     Principal payments due in the five years after October 31, 1995 (excluding
the ESOP loan guarantee) are:

                        (in thousands)

<TABLE>
                       <S>    <C> <C>
                       1996   -   $ 2,269
                       1997   -     9,644
                       1998   -     9,246
                       1999   -     9,282
                       2000   -     9,074
</TABLE>

     The Company had available unused lines of credit in various countries
totaling approximately $96.4 million short-term and $35.0 million long-term at
October 31, 1995.  Outstanding bank loans at October 31, 1995 and 1994 had
weighted average interest rates of 4.3 percent and 6.1 percent, respectively.





                                     -37-
<PAGE>   38
ITEM 8.  (Continued)


NOTE C - FOREIGN CURRENCY TRANSLATION


     The cumulative effects of foreign currency translation gains and losses
are reflected in the Translation Adjustment section of Shareholders' Equity.
Translation adjustments increased equity by $4,201,000 in 1995 and $11,277,000
in 1994 and decreased equity by $7,453,000 in 1993.

     Foreign currency transaction gains and losses, which include U.S. dollar
translation losses in Brazil, are reflected in income.  For the three-year
period reported herein, foreign currency losses have decreased Income from
Continuing Operations before Income Taxes as follows:

                       (in thousands)

<TABLE>
                     <S>    <C> <C>
                     1995   -   $  779
                     1994   -    2,751
                     1993   -      678
</TABLE>





                                     -38-
<PAGE>   39
ITEM 8.  (Continued)

NOTE D - STOCK OPTIONS AND AWARDS


     Under the Company's stock option and award plans, approximately 1,413,600
shares of common stock are reserved for issuance to key employees as of October
31, 1995.  The options are exercisable at various dates and expire ten years
from the date of grant.  Stock options granted during 1995 totaled 123,750
shares.  A total of 43,500 options were forfeited during the year.  Stock
appreciation rights may be granted as part of a stock option or as a separate
right to the holders of any options previously granted.  The present plan also
provides for awards of restricted and performance shares of common stock to key
employees.  There were 43,800 restricted shares awarded in 1995 and 93,150
restricted shares awarded in 1994.  Awards of performance shares totaled
130,650 in 1995 and 1,500 in 1994.  When rights, options or awards are granted,
associated compensation expense is accrued from date of grant to the date such
options or awards are exercised.

     A summary of the activity follows:

<TABLE>
<CAPTION>
                                      Number   Option Price Range
                                    of Shares       Per Share    
                                    ---------  ------------------
<S>                                  <C>         <C>
Options outstanding at October 31:
   1995. . . . . . . . . . . .       617,051     $9.83 - $21.88
   1994. . . . . . . . . . . .       623,337      6.50 -  15.58

Options exercised during the year:
   1995. . . . . . . . . . . .        86,536     $6.50 - $14.83
   1994. . . . . . . . . . . .       141,138      9.83 -  14.83

Options exercisable at October 31:
   1995. . . . . . . . . . . .       340,376     $9.83 - $15.58
   1994. . . . . . . . . . . .       294,987      6.50 -  14.83
</TABLE>



     Shares available for future grants amounted to approximately 796,550 and
300,450 as of October 31, 1995 and 1994, respectively.

     All data presented herein has been restated for the effects of a
three-for-two stock split of the Company's common stock which was approved on
July 27, 1994.





                                     -39-
<PAGE>   40
ITEM 8.  (Continued)

NOTE E - BENEFIT PLANS

     The Company and its subsidiaries have a number of noncontributory defined
benefit pension plans covering most U.S. employees.  Pension benefits for the
hourly employees covered by these plans are expressed as a percentage of
average earnings over a ten-year period times years of continuous service or as
a flat benefit rate times years of continuous service.  Benefits for salaried
employees are based upon a percentage of the employee's average compensation
during the preceding ten years, reduced by 50 percent of the Social Security
Retirement Benefit.  The Company's funding policy is to contribute amounts to
the plans sufficient to meet the minimum funding requirements set forth in the
Employee Retirement Income Security Act of 1974, plus such additional amounts
as may be deemed appropriate from time to time.

     The Company also sponsors defined contribution pension plans for the
hourly employees of its operations in Benton, Arkansas; Kings Mountain, North
Carolina; and Minneapolis, Minnesota.  Contributions and expense for these
plans are computed at 3 percent of annual employee compensation or at a
discretionary rate as determined each year by the Company.  Hourly employees at
the Orange, California facility are covered by a multiemployer plan which
provides benefits in a manner similar to a defined contribution arrangement.

     The Company accounts for pension costs under the provisions of FASB
Statement No. 87 for contributory defined benefit pension plans covering its
employees in Japan and the United Kingdom.  Benefits under these plans are
generally based on years of service and compensation during the years
immediately preceding retirement.  Funding is predicated on minimum
contributions as required by local laws and regulations plus additional
amounts, if any, as may be deemed appropriate.  Some employees of other foreign
operations also participate in postemployment benefit arrangements not subject
to the provisions of FASB Statement No. 87.




                                      
                                     -40-
<PAGE>   41
ITEM 8.  (Continued)

NOTE E - BENEFIT PLANS (Continued)


     A summary of the various components of net periodic pension cost for
defined benefit plans and cost information for other plans for the three-year
period is shown below:

<TABLE>
<CAPTION>
                                      1995     1994     1993
                                      ----     ----     ----
                                           (in thousands)
<S>                                 <C>      <C>       <C>
Defined benefit plans:
   Service cost. . . . . . . . . .  $  3,166  $ 3,054  $ 2,360
   Interest cost . . . . . . . . .     8,548    7,484    7,087
   Actual return on plan assets. .   (26,195)  (4,124) (19,945)
   Net amortization and deferral .    14,671   (6,499)  10,001
                                                               
                                    --------- -------- --------
   Net pension expense (income). .       190      (85)    (497)
Other plans:
   Defined contribution plans. . .       388      356      284
   Multiemployer plan. . . . . . .        70       81       75
   Foreign plans . . . . . . . . .       585      599      471
                                                               
                                    --------- -------- --------
   Total pension expense . . . . .  $  1,233  $   951  $   333 
                                    ========= ======== ========
</TABLE>

Assumptions used in the accounting for the defined benefit plans as of October
31 were:

<TABLE>
<CAPTION>
                                                      1995    1994   1993
                                                      ----    ----   ----
   <S>                                               <C>     <C>    <C>
   Weighted-average discount rate . . . . . . . . .   7.25%   8.5%   7.25%
   Rates of increase in compensation levels . . . .   4.5 %   4.5%   4.5 %
   Expected long-term rate of return on assets. . .  10.0 %  10.0%  10.0 %
</TABLE>





                                     -41-
<PAGE>   42
ITEM 8.  (Continued)

NOTE E - BENEFIT PLANS (Continued)

     The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheets at October 31, 1995 and 1994 for the Company's
U.S. and foreign defined benefit pension plans.  Other foreign pension plans do
not determine net assets or the actuarial present value of accumulated benefits
as calculated and disclosed herein:

<TABLE>
<CAPTION>
                                           1 9 9 5                       1 9 9 4          
                                ----------------------------  ----------------------------
                                 Plans Whose    Plans Whose    Plans Whose    Plans Whose
                                Assets Exceed   Accumulated   Assets Exceed   Accumulated
                                 Accumulated     Benefits      Accumulated     Benefits
                                   Benefits    Exceed Assets     Benefits    Exceed Assets
                                -------------  -------------  -------------  -------------
                                                       (in thousands)
<S>                                <C>          <C>              <C>           <C>
Actuarial present value of
  benefit obligations:
  Vested benefit obligation. . . . $(51,207)     $(54,267)       $(44,039)     $(43,967) 
                                   =========     =========       =========      =========
  Accumulated benefit obligation . $(53,236)     $(57,696)       $(45,576)     $(46,448) 
                                   =========     =========       =========      =========

Projected benefit obligation . . . $(57,085)     $(69,788)       $(48,626)     $(55,256)
Market value of plan assets. . . .   89,627        52,726          78,223        44,018
                                                                                         
                                   ---------     ---------       ---------      ---------
Projected benefit obligation less
   than or (in excess of) plan
   assets. . . . . . . . . . . . .   32,542       (17,062)         29,597       (11,238)
Unrecognized net (gain) loss . . .   (1,040)        7,883             (71)        5,028
Unrecognized prior service cost. .    2,479         2,880           2,741         2,964
Unrecognized net (asset) obligation  (4,528)        3,790          (5,712)        1,190
Additional liability . . . . . . .        0        (2,585)              0        (1,035)
                                                                                        
                                   ---------    ----------       ---------     ---------
Net pension asset (liability)
   recognized in the Consolidated
   Balance Sheet . . . . . . . . . $ 29,453     $  (5,094)       $ 26,555      $ (3,091)   
                                   =========    =========       =========      =========   
</TABLE>

     Plan assets at October 31, 1995 are invested in publicly traded and
restricted mutual funds, various corporate and government bonds, guaranteed
income contracts and listed stocks, including common stock of the Company
having a market value of $3,701,700 at that date.





                                      -42-
<PAGE>   43
ITEM 8.  (Continued)

NOTE E - BENEFIT PLANS (Continued)

     In addition to pension benefits, the Company sponsors other defined
benefit postretirement plans in the U.S. which provide medical and life
insurance benefits for certain hourly and salaried employees.  Benefits are
provided on a noncontributory basis for those salaried retirees who have
attained the age of 55 with 15 years of service and those hourly retirees who
have attained the age of 60 with 15 years of service or 30 years of service
with no age restriction, up to 65 years of age.  Coverage is also provided for
surviving spouses of hourly retirees.  Medical plans for both employee groups
incorporate deductibles and coinsurance features.  The plans are unfunded, and
postretirement benefit claims and premiums are paid as incurred.
Company-sponsored postretirement benefits are not available to employees of
foreign subsidiaries.

     Components of net periodic postretirement benefit cost are shown below.
Net periodic cost associated with retiree life insurance benefits amounted to
$269,000 in 1995, $314,000 in 1994, and $296,000 in 1993.

<TABLE>
<CAPTION>
                                            1995    1994    1993
                                            ----    ----    ----
                                               (in thousands)
<S>                                      <C>      <C>      <C>
Service cost. . . . . . . . . . . . . . . $   386  $  419  $  377
Interest cost . . . . . . . . . . . . . .   1,463   1,357   1,411
Actual return on plan assets. . . . . . .       0       0       0
Amortization of transition obligation . .       0       0       0
Net amortization and deferral . . . . . .     (11)     49      26
                                          -------- ------  ------
Net periodic postretirement benefit cost. $ 1,838  $1,825  $1,814 
                                          =======  ======  ====== 
</TABLE>

     The following table shows the aggregated funded status of the benefit
plans reconciled with amounts recognized in the Company's Consolidated Balance
Sheets. The accrued postretirement cost associated with retiree life insurance
benefits amounted to $3,410,000 and $3,257,000 as of October 31, 1995 and 1994,
respectively.

<TABLE>
<CAPTION>
                                                   October 31,  
                                                 ---------------
                                                 1995       1994
                                                 ----       ----
                                                 (in thousands)
<S>                                            <C>        <C>    
Accumulated postretirement benefit obligations:
   Retirees. . . . . . . . . . . . . . . . .   $ (7,897)  $ (8,048)
   Fully eligible active plan participants .     (3,462)    (2,834)
   Other active plan participants. . . . . .     (7,269)    (7,003)
                                               ---------  ---------
                                                (18,628)   (17,885)
 Plan assets at fair value. . . . . . . . . .         0          0 
                                               ---------  ---------
Accumulated postretirement benefit
   obligation (in excess of) plan assets . .    (18,628)   (17,885)
Unrecognized net loss. . . . . . . . . . . .        771        716
Unrecognized prior service cost. . . . . . .          0          0
Unrecognized transition obligation . . . . .          0          0 
                                               ---------  ---------

(Accrued) postretirement benefit cost. . . .   $(17,857)  $(17,169) 
</TABLE>                                       =========  =========





                                      -43-
<PAGE>   44
ITEM 8.  (Continued)

NOTE E - BENEFIT PLANS (Continued)

     The weighted-average annual assumed rate of increase in the per capita
cost of covered benefits in the medical plans, or health care cost trend rate,
was 10.0 percent for 1995 and 12.0 percent for 1994.  The trend rate is assumed
to decrease gradually to 5.5 percent in the year 2005 and remain at that level
thereafter.  Increasing the assumed health care cost trend rate by one
percentage point in each year would increase the accumulated postretirement
benefit obligation as of October 31, 1995 by $1,728,300 and the aggregate of
service and interest cost components of net periodic postretirement benefit
cost for 1995 by $48,200.  The weighted-average discount rate used in
determining the accumulated postretirement benefit obligation was 7.25 percent
and  8.5 percent at October 31, 1995 and 1994, respectively.  The annual
assumed rate of salary increase for retiree life insurance is 4.5 percent at
October 31, 1995 and October 31, 1994.





                                      -44-
<PAGE>   45
ITEM 8.  (Continued)

NOTE F - INCOME TAXES

     The components of income from continuing operations before income taxes
and the provision for income taxes are summarized as follows:

<TABLE>
<CAPTION>
                                         1995     1994     1993
                                         ----     ----     ----
                                             (in thousands)
<S>                                    <C>     <C>      <C>
Income from continuing operations
   before income taxes
      Domestic . . . . . . . . . . . . $23,268  $19,184  $ 8,313
      Foreign  . . . . . . . . . . . .  16,674    8,619   12,289 
                                       -------- -------- --------
                                        39,942   27,803   20,602

Provision for income taxes
   Current
      Domestic-Federal . . . . . . . .   7,402    5,672    3,348
              -State and local . . . .     621    1,838      382
      Foreign. . . . . . . . . . . . .   7,082    4,531    5,064 
                                       -------- -------- --------
                                        15,105   12,041    8,794

   Deferred
      Domestic-Federal . . . . . . . .  (1,323)    (650)  (1,376)
              -State and local . . . .    (273)    (257)    (130)
      Foreign. . . . . . . . . . . . .     751     (858)    (701)
                                       -------- -------- --------
                                          (845)  (1,765)  (2,207)

   Benefit of operating loss
      carryforwards. . . . . . . . . .  (4,701)  (2,092)       0 
                                       -------- -------- --------
                                         9,559    8,184    6,587

Income from continuing operations
      Domestic . . . . . . . . . . . .  16,841   12,581    6,089
      Foreign. . . . . . . . . . . . .  13,542    7,038    7,926 
                                       -------- -------- --------
                                       $30,383  $19,619  $14,015 
                                       ======== ======== ========
</TABLE>

     A reconciliation of the effective tax rate to the U.S. statutory rate for
1995, 1994 and 1993 follows:

<TABLE>
<CAPTION>
                                           1995   1994   1993
                                           ----   ----   ----
<S>                                      <C>      <C>    <C>
Statutory U.S. federal income tax rate. .  35.0%  35.0%  34.8%
State and local taxes on income net of
   domestic income tax benefit. . . . . .   0.6    3.7    0.8
Increase in effective rate due to
   impact of foreign subsidiaries . . . .   5.0    2.4    0.4
Benefit of operating loss carryforwards . (11.8)  (7.5)     0
Repatriation of foreign earnings. . . . .   1.2    1.5    0.6
Reserve contracts . . . . . . . . . . . .  (5.5)  (5.0)  (3.7)
Goodwill with no U.S. tax benefit . . . .   1.6    2.0    2.5
All other . . . . . . . . . . . . . . . .  (2.2)  (2.7)  (3.4)
                                           -----  -----  -----

   Effective income tax rate. . . . . . .  23.9%  29.4%  32.0%  
                                           =====  =====  =====  
</TABLE>





                                      -45-
<PAGE>   46
ITEM 8.  (Continued)

NOTE F - INCOME TAXES (Continued)

Significant components of the Company's deferred income tax liabilities and
assets as of October 31, are as follows:

<TABLE>
<CAPTION>
                                                          (in thousands)
   <S>                                             <C>     <C>      <C>
   Deferred income tax liabilities:                  1995     1994     1993
                                                     ----     ----     ----
      Tax over book depreciation. . . . . . . . .  $13,140  $13,142  $13,234
      Prepaid pension asset . . . . . . . . . . .   10,975    9,991    8,760
      United Kingdom property sale. . . . . . . .    1,360    1,407    1,274
      Other . . . . . . . . . . . . . . . . . . .      375      278      273
                                                   -------  -------  -------
         Total deferred income tax liabilities. .   25,850   24,818   23,541
   Deferred income tax assets:
      Postretirement benefits . . . . . . . . . .    7,032    6,769    6,783
      Employee benefits . . . . . . . . . . . . .    7,909    7,157    6,407
      Net operating loss carryforwards. . . . . .   66,869   58,587    4,895
      Inventory valuation . . . . . . . . . . . .    2,166    2,111    2,048
      Product liability . . . . . . . . . . . . .    3,620    2,710    1,928
      Other . . . . . . . . . . . . . . . . . . .    4,349    4,452    2,306
                                                   -------- -------  -------
         Total deferred income tax assets . . . .   91,945   81,786   24,367

      Valuation allowance for deferred income tax
         assets . . . . . . . . . . . . . . . . .   66,869   58,587    4,210
                                                   -------- -------  -------
         Net deferred income tax assets . . . . .   25,076   23,199   20,157
                                                                            
                                                   -------- -------  -------
         Net deferred income tax liabilities. . .  $   774  $ 1,619  $ 3,384 
                                                   =======  =======  ======= 
</TABLE>

     The valuation allowance has increased by $8,282,000 in 1995, $54,377,000
in 1994, and $1,640,000 in 1993.  At October 31, 1995, the Company also had
unused foreign tax credit carryovers of approximately $2,813,000 of which
$489,000 will expire in 1997, $721,000 in 1998, and the balance will expire in
the year 1999.

     Of the $66,869,000 in tax benefits from operating loss carryforwards,
$65,037,000 relates to the ORSTA Hydraulik operations acquired in 1994 which
are available indefinitely.  The balance of the loss carryforward relates to
operations in Brazil and is also available indefinitely.





                                      -46-
<PAGE>   47
ITEM 8.  (Continued)

NOTE G - QUARTERLY DATA (unaudited)

<TABLE>
<CAPTION>
     1995                        First   Second   Third    Fourth    Total   
-----------------------------------------------------------------------------
                                   (in thousands, except per-share amounts)
<S>                            <C>      <C>      <C>      <C>       <C>
Net sales. . . . . . . . . . . $135,307 $153,965 $162,728 $169,836  $621,836
Gross profit . . . . . . . . .   41,461   45,296   48,389   49,833   184,979
Net income . . . . . . . . . .    6,120    7,307    8,393    8,563    30,383
Earnings per share:
Net income:
   Primary . . . . . . . . . .     $.36     $.43     $.50     $.52     $1.82
   Fully diluted . . . . . . .      .34      .41      .47      .49      1.72

Dividends per common share . .     .125     .125     .125     .135      .510

     1994                        First   Second   Third    Fourth     Total
-----------------------------------------------------------------------------
                                   (in thousands, except per-share amounts)
Net sales. . . . . . . . . . . $104,360 $121,443 $139,554 $151,574  $516,931
Gross profit . . . . . . . . .   31,701   38,528   38,845   44,156   153,230
Income from continuing
   operations. . . . . . . . .    2,068    6,609    4,933    6,009    19,619
Income from discontinued
   operations. . . . . . . . .        0        0    5,462        0     5,462
Net income . . . . . . . . . .    2,068    6,609   10,395    6,009    25,081
Earnings per share:
   Primary:
     Income from continuing
        operations. . . . .    $    .10   $  .40   $  .29  $   .36  $   1.14
      Net Income. . . . . .         .10      .40      .64      .36      1.50
   Fully diluted:
     Income from continuing
        operations. . . . .         .10      .38      .27      .34      1.09
     Net Income . . . . . .         .10      .38      .60      .34      1.41
Dividends per common share . .     .113     .114     .125     .125      .477
</TABLE>

     The Company received fees from a licensing agreement between the Company's
Astron Division in Europe and Geoyang Development Co., Ltd., in Korea.  The
fees increased net income by $365,000 or $.02 per share in the first quarter of
1994.

     Effective with the third quarter of 1994, financial results include the
operations of ORSTA Hydraulik acquired by the Company on May 3, 1994 (see Note
K).  Third and fourth quarter results also include charges related to the
closure and consolidation of certain previously existing company facilities in
Europe and the U.S.  These charges decreased net income by $2,515,000 or $.17
per share in the third quarter and $1,275,000 or $.08 per share in the fourth
quarter.  Income from discontinued operations in the third quarter of 1994 of
$5,462,000 represents the elimination of income tax accruals no longer required
that relate to a business written off in 1989 which was treated as a
discontinued operation.

     Earnings per share are computed independently for each of the quarters
presented.  Therefore, the sum of the quarterly earnings per share do not
necessarily equal the total for the year.





                                      -47-
<PAGE>   48
ITEM 8.  (Continued)

NOTE H - PRODUCT DEVELOPMENT COSTS


     The Company maintains ongoing development programs at various facilities
to formulate, design and test new products and product alternatives, and to
further develop and significantly improve existing products.  The Company
intends to continue substantial expenditures on research and development in
this area.  Costs associated with these activities, which the Company expenses
as incurred, are shown for the three-year period below:


<TABLE>
<CAPTION>
                                       1995      1994      1993
                                       ----      ----      ----
                                            (in thousands)
     <S>                             <C>       <C>       <C>
     Research and Development. . .   $ 8,449   $ 7,293   $ 6,708
     Engineering . . . . . . . . .    17,710    14,436    12,416
                                     -------   -------   -------

                                     $26,159   $21,729   $19,124  
                                     =======   =======   =======  

     Percent of net sales. . . . .      4.2%      4.2%      4.3% 
                                        ====      ====      ==== 
</TABLE>





                                      -48-
<PAGE>   49
ITEM 8.  (Continued)

NOTE I - SEGMENT REPORTING


     The Company is engaged in the design, manufacture and sale of products in
three segments:  Hydraulic Systems, Building Systems and Metal Products and
Fluid Purification.

     Operating income represents total revenue less total operating expenses.
Identifiable assets are those assets used in the operations of each business
segment or geographic area or which are allocated when used jointly.  Corporate
assets are principally cash and cash equivalents.


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
INDUSTRY SEGMENTS                                (in thousands)
                                            Building
                                            Systems
                                              And
                                Hydraulic    Metal       Fluid
     1995                        Systems    Products  Purification    Total  
-----------------------------------------------------------------------------
<S>                             <C>         <C>         <C>         <C>
Net sales. . . . . . . . . . .  $285,679    $173,458    $162,699    $621,836
Operating income . . . . . . .    25,130      10,205       9,915      45,250
Interest expense . . . . . . .                                         6,912
Other income - net . . . . . .                                         1,604
Income from continuing operations
   before income taxes . . . .                                        39,942
Identifiable assets. . . . . .   192,737      87,317     141,716     421,770
Corporate assets . . . . . . .                                        38,086
Total assets . . . . . . . . .                                       459,856
Depreciation and amortization.     7,757       3,088       8,348      19,193
Capital expenditures . . . . .    28,110       3,599       5,728      37,437

     1994                                                                    
-----------------------------------------------------------------------------
Net sales. . . . . . . . . . .   $240,830   $132,990    $143,111    $516,931
Operating income . . . . . . .     20,694     10,358       3,777      34,829
Interest expense . . . . . . .                                         4,952
Other expense - net. . . . . .                                         2,074
Income from continuing operations
   before income taxes . . . .                                        27,803
Identifiable assets. . . . . .    168,684     64,898     137,879     371,461
Corporate assets . . . . . . .                                        51,517
Total assets . . . . . . . . .                                       422,978
Depreciation and amortization.      6,549      2,604       8,586      17,739
Capital expenditures . . . . .     16,540      2,696       3,816      23,052
</TABLE>





                                      -49-
<PAGE>   50
ITEM 8.  (Continued)

NOTE I - SEGMENT REPORTING (continued)


<TABLE>
<CAPTION>
     1993                                                                    
-----------------------------------------------------------------------------
<S>                              <C>        <C>         <C>         <C>
Net sales. . . . . . . . . . .   $190,170   $127,636    $130,771    $448,577
Operating income . . . . . . .     17,170     10,699      (2,499)     25,370
Interest expense . . . . . . .                                         5,744
Other income - net . . . . . .                                           976
Income from continuing operations
   before income taxes . . . .                                        20,602
Identifiable assets. . . . . .    124,608     59,124     137,895     321,627
Corporate assets . . . . . . .                                        25,708
Total assets . . . . . . . . .                                       347,335
Depreciation and amortization.      6,125      2,455       7,956      16,536
Capital expenditures . . . . .      4,434      1,760       3,241       9,435
</TABLE>





                                      -50-
<PAGE>   51
ITEM 8.  (Continued)

NOTE  I - SEGMENT REPORTING (Continued)


     In the following table, data in the column labeled "Europe" pertains to
subsidiaries operating within the European Economic Community.  Data for all
remaining overseas subsidiaries is shown in the column marked "Other."


<TABLE>
<CAPTION>
GEOGRAPHIC AREA                                   (in thousands)

                          United
     1995                 States   Europe    Other  Elimination  Consolidated 
----------------------------------------------------------------------------- 
<S>                     <C>       <C>      <C>        <C>           <C>
Sales to customers. . . $329,426  $208,035  $ 84,375                $621,836
Inter-area sales. . . .   26,320     6,888     1,884  $ 35,092                
                        ------------------------------------------------------
Total sales . . . . . .  355,746   214,923    86,259    35,092       621,836
Operating income. . . .   30,800     4,895     9,555                  45,250
Identifiable assets . .  224,984   143,871    52,915                 421,770


     1994                                                                    
-----------------------------------------------------------------------------
Sales to customers. . . $290,361  $160,658  $ 65,912                $516,931
Inter-area sales. . . .   21,585     4,014     1,517  $ 27,116               
                        -----------------------------------------------------
Total sales . . . . . .  311,946   164,672    67,429    27,116       516,931
Operating income. . . .   26,291      (201)    8,739                  34,829
Identifiable assets . .  207,578   115,683    48,200                 371,461


     1993                                                                    
-----------------------------------------------------------------------------
Sales to customers. . . $242,333  $151,207  $ 55,037                $448,577
Inter-area sales. . . .   17,493     3,165       880  $ 21,538               
                        -----------------------------------------------------
Total sales . . . . . .  259,826   154,372    55,917    21,538       448,577
Operating income. . . .   15,352     5,208     4,810                  25,370
Identifiable assets . .  193,036    87,557    41,034                 321,627
</TABLE>


     Net assets of foreign subsidiaries at October 31, 1995 and 1994 were
$120,163,000 and $108,852,000, respectively, of which net current assets were
$69,717,000 and $80,253,000, also respectively.





                                      -51-
<PAGE>   52
ITEM 8 (Continued)

NOTE J - FAIR VALUES OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used by the Company in
estimating its fair value disclosures of financial instruments:

     Cash and cash equivalents:  The carrying amounts reported in the balance
sheet for cash and cash equivalents approximate fair value.

     Long and short-term debt:  The carrying amounts of the Company's
borrowings under its short-term credit agreements approximate their fair value.
The fair values of the long-term debt are estimated using discounted cash flow
analysis, based on the Company's incremental borrowing rates for similar types
of borrowing arrangements.

     Foreign currency exchange contracts:  The Company utilizes foreign
currency exchange contracts to minimize the impact of currency fluctuations on
transactions.  At October 31, 1995, the Company and its subsidiaries held
contracts for $9,478,000 with a fair value of $9,408,000.  The fair values of
these foreign currency exchange contracts are estimated based on quoted
exchange rates at October 31, 1995.

     The carrying amounts and fair values of the Company's financial
instruments at October 31, 1995 are as follows:

<TABLE>
<CAPTION>
                                            (in thousands)
                                     Carrying Amount   Fair Value
                                     ---------------   ----------
     <S>                                <C>             <C>
     Cash and cash equivalents          $ 39,689        $ 39,689
     Short-term debt                      19,725          19,725

     Long-term debt:
        Senior notes                    $ 45,000        $ 47,667
        Industrial revenue loans           3,533           3,596
        Mortgages                          4,973           4,943
        Other                              1,010           1,037
                                                                
                                        --------        --------
                                          54,516          57,243
        ESOP guarantee                    21,682          22,440
                                                                
                                        --------        --------
                                        $ 76,198        $ 79,683
                                        ========        ========
</TABLE>

     From time to time, the Company makes loans to its foreign subsidiaries
denominated in the subsidiaries' functional currencies.  Generally, these loans
are made when the Company can borrow at lower interest rate spreads than are
available to the subsidiary in its local market.  Foreign currency forward
contracts are used to hedge the Company's receipt of principal and interest due
from the loans.  The forward contracts are an effective hedge against
fluctuations in the value of the foreign currency.  Therefore, the contracts
have no income statement impact.





                                      -52-
<PAGE>   53
ITEM 8.(Continued)

NOTE K - ACQUISITIONS

HALL F&D HEAD COMPANY
     Effective January 31, 1995, the Company acquired the assets of Hall F&D
Head Company, a producer of medium and large diameter bump and spun metal
products, located in Saginaw, Texas.  The acquisition was accounted for as a
purchase transaction, and therefore, included in the accompanying financial
statements since the acquisition date.  Pro forma financial results are not
provided herein because the impact of sales and net earnings on consolidated
amounts is immaterial.


ORSTA HYDRAULIK
     Effective May 3, 1994 (the "acquisition date"), the Company acquired the
stock of Sachsenhydraulik Chemnitz GmbH ("SHC") and its wholly owned subsidiary
(Hydraulik Rochlitz GmbH), which are known as ORSTA Hydraulik.  ORSTA is a
manufacturer of hydraulic cylinders, piston and gear pumps and industrial
valves.  The stock was acquired from the Treuhandanstalt, the regulatory agency
of the Federal Republic of Germany responsible for the privatization of the
former East German state-owned enterprises.  The acquisition has been accounted
for as a purchase transaction; therefore, the accounts are included in the
accompanying financial statements since the acquisition date.  Pro forma
financial results are not provided herein since the companies acquired operated
in a different environment under the Treuhandanstalt control.

     Under terms of the Agreement, the Company tendered no financial
consideration to acquire the stock of SHC and its wholly owned subsidiary but
received, in addition to the net business assets of the two companies, cash
contributions of 59.0 million Deutsche marks (approximately U.S. $36.0 million)
to fund pre-existing capital investment programs and to cover estimated
operating losses over a period of two years.  This additional consideration was
negotiated with the Treuhandanstalt based on the financial position of the
acquired companies as of January 1, 1994 (the "measurement date").  Cash
contributions available to the Company on the acquisition date were adjusted
for funds consumed by the operations during the interim period between the
measurement and acquisition dates.  Details of investment on the acquisition
date are as follows:

<TABLE>
<CAPTION>
                                             (in thousands)
                                             --------------
     <S>                                        <C>
     Fair value of assets acquired,
        other than cash and cash equivalents    $ 31,836
     Liabilities assumed                         (19,333)
     Deferred credit - operating loss
        indemnification                          (23,643)
                                                        
                                                --------
     Cash and cash equivalents acquired         $ 11,140
                                                ========
</TABLE>





                                      -53-
<PAGE>   54
ITEM 8. (Continued)

NOTE K - ACQUISITIONS (Continued)


     In addition to the cash acquired at the acquisition date, a balance of
44.1 million Deutsche marks (approximately U.S.  $28.5 million) was receivable
from the Treuhandanstalt in regard to the original cash contribution during
fiscal 1995 and 1994.   Of the funds provided by the Treuhandanstalt since the
acquisition date, 33.8 million Deutsche marks (approximately U.S. $22.6
million) were consumed by operating losses from May 3, 1994 to October 31, 1995
and 20.8 million Deutsche marks (approximately U.S. $14.5 million) were used to
fund the pre-existing capital investment program.


     The Company agreed to the following obligations and guarantees with
respect to the operation of the acquired businesses:

     a)  to maintain a minimum employment level for a period
         of three years; the level stipulated by the Agreement
         is considered by the Company to be reasonable and
         necessary for the intended use of the business,

     b)  to invest 39.0 million Deutsche marks (approximately
         U.S. $23.6 million) in capital programs over a period
         of four years,

     c)  to continue to operate the businesses for a minimum
         of five years, and

     d)  to refrain from selling or transferring acquired land
         and buildings for a period of six years.

     Of the total 59.0 million Deutsche mark cash contribution to be received
(as calculated on the measurement date of January 1, 1994), 51.5 million
Deutsche marks was designed as an indemnification of estimated operating losses
over a period of two years from acquisition.  The amount of operating loss
indemnification available to the Company was adjusted for cash consumed by the
ORSTA operations between the measurement date and the acquisition date.  The
operating loss indemnification is being amortized based on estimated operating
results of the ORSTA Hydraulik operations as determined on May 3, 1994.  The
quarterly amortization value will remain unchanged as actual results are
reported and will be translated from Deutsche marks into U.S. dollars at the
average exchange rate for the period.  The deferred credit on the balance sheet
is translated at end-of-period rate.





                                      -54-
<PAGE>   55
ITEM 8.  (Continued)

NOTE K - ACQUISITIONS (Continued)


     Negative Goodwill Amortization:

<TABLE>
<CAPTION>
Fiscal Quarters               Deutsche Marks  U.S. Dollars
---------------               --------------  ------------
                                     (in thousands)
<S>                           <C> <C>           <C>
Amounts Amortized
-----------------
FISCAL 1994
   Third quarter, 1994        DM   3,297        $  2,044
   Fourth quarter, 1994            7,015           4,422
                                 -------        --------
      TOTAL FISCAL 1994       DM  10,312        $  6,466

FISCAL 1995
   First quarter, 1995        DM   6,855        $  4,419
   Second quarter, 1995            6,500           4,470
   Third quarter, 1995             5,410           3,879
   Fourth quarter, 1995            4,745           3,327
                                 -------        --------
      TOTAL FISCAL 1995       DM  23,510        $ 16,095
                              ----------        --------
      TOTAL AMORTIZED         DM  33,822        $ 22,561
                              ==========        ========


Remainder (Balance Sheet)
-------------------------
FISCAL 1996
   First quarter, 1996        DM   3,745        $  2,662
   Second quarter, 1996            1,504           1,069
                              ----------        --------
      TOTAL                   DM   5,249        $  3,731
                              ==========        ========
</TABLE>


     ORSTA Hydraulik income statement for the twelve months ended October 31,
1995 and the six months ended October 31, 1994 follows:

<TABLE>
<CAPTION>
                                            Twelve       Six
                                            Months      Months
                                            Ended        Ended
                                             1995        1994 
                                            ------      ------
                                              (in thousands)
        <S>                                <C>         <C>
        Sales                              $ 35,846    $ 15,292
        Cost of products sold                41,918      16,708
        Less:  negative goodwill            (16,095)     (6,466)
                                                                
                                           ---------   ---------
           Total cost of products sold       25,823      10,242
                                                                
                                           ---------   ---------
        Gross profit                         10,023       5,050
        Selling, administrative and
           general expense                   12,234       4,910
                                                                
                                           ---------   ---------
        Operating (loss) profit            $ (2,211)   $    140 
                                           =========   =========
</TABLE>





                                      -55-
<PAGE>   56
ITEM 8.  (Continued)

NOTE L - PREFERRED STOCK


     During fiscal 1990, the Company designated two separate series of
preferred shares as follows:

Series A Participating Preferred Shares
---------------------------------------

     On November 29, 1989, the Company created a new class of stock, Series A
Participating Preferred Shares (the Series A) and adopted a Shareholder Rights
Plan (the Plan).  The Plan is designed to protect shareholders from the
disruptions created by market accumulators and certain abusive takeover
practices.  The Plan provides for the distribution of one preferred share
purchase right as a dividend for each outstanding share of common stock.  Each
right, when exercisable, entitles shareholders to buy one one-hundredth of a
share of the Series A preferred stock for $75.  Each one one-hundredth of a
share of preferred stock is intended to be the practical economic equivalent of
a share of common stock and will have one one-hundredth of a vote on all
matters submitted to a vote of shareholders of the Company.  Until the rights
become exercisable, they have no dilutive effect on earnings per share.

     The rights may be exercised, in general, only if a person
or group acquires 20 percent or more of the common stock without the prior
approval of the Board of Directors of the Company or announces a tender or
exchange offer that would result in ownership of 20 percent or more of the
common stock.  In the event of the acquisition of 20 percent or more of the
common stock without the prior approval of the Board, all rights holders except
the acquirer may purchase the common stock of the Company having a value of
twice the exercise price of the rights.  If the Company is acquired in a
merger, after the acquisition of 20 percent of the voting power of the Company,
rights holders except the acquirer may purchase shares in the acquiring company
at a similar discount.  The Plan was not adopted in response to any pending
takeover proposal, and the rights will expire on November 29, 1999.





                                      -56-
<PAGE>   57
ITEM 8.  (Continued)

NOTE L - Preferred Stock (Continued)


Series B ESOP Convertible Preferred Stock
-----------------------------------------

     On February 14, 1990, the Company established two newly-formed leveraged
employee stock ownership plans (the ESOPs) and sold to the ESOPs 1,074,107
shares of a newly created cumulative ESOP Convertible Preferred Stock Series B
(the Series B) for a total of $24,973,000.  The ESOPs currently cover most
domestic salaried employees and certain domestic hourly employees.  The
remaining Series B shares are convertible into 1,301,082 shares of common stock
at any time (1.235 shares of common stock for each Series B share), subject to
anti-dilution adjustments.  The Series B shares are entitled to one and
one-half votes per share and will vote together with the common stock as a
single class.  The Series B shares are held by a trustee which votes the
allocated shares as directed by Plan participants.  Unallocated shares held by
the trustee are voted in the same proportion as are the allocated shares.
Annual dividends are $1.97625 per share.  The ESOPs have borrowed to purchase
the Series B shares, and the Company guaranteed the repayment of the remaining
outstanding balance of that loan.

     The Company paid to the ESOPs $2,084,000 in 1995 ($2,097,000 in 1994 and
$2,109,000 in 1993) in preferred stock dividends and accrued or paid an
additional $1,787,000 in 1995 ($1,310,000 in 1994 and $1,036,000 in 1993) in
Company match of employees' contributions to the plan and to cover amounts
sufficient to meet the debt service.  These expenses were determined on the
shares allocated method.  In turn, the ESOPs made debt service payments of
$2,364,000 in 1995, $2,366,000 in 1994, and $1,841,000 in 1993, primarily for
interest charges.





                                      -57-
<PAGE>   58
ITEM 8.  (Continued)


Report of Ernst & Young LLP, Independent Auditors



Shareholders and Board of Directors
Commercial Intertech Corp.
Youngstown, Ohio

We have audited the accompanying consolidated balance sheets of Commercial
Intertech Corp. and subsidiaries as of October 31, 1995 and 1994, and the
related statements of consolidated income, shareholders' equity and cash flows
for each of the three years in the period ended October 31, 1995.  Our audits
also included the  financial statement schedule listed in the Index at Item
14(a).  These financial statements and schedule are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Commercial
Intertech Corp. and subsidiaries at October 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 31, 1995, in conformity with generally
accepted accounting principles.  Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.



                                        /s/Ernst & Young LLP

Cleveland, Ohio
December 8, 1995





                                      -58-
<PAGE>   59
ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
           ACCOUNTING AND FINANCIAL DISCLOSURE.

                N/A


                                   PART III



ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    Regarding the directors of the Registrant, reference is made to the
information set forth under the caption "Election of Directors" in the
company's definitive Proxy Statement filed January, 1996, which information is
incorporated by reference herein.

    The principal executive officers of the Company and their recent business
experience are as follows:

<TABLE>
<CAPTION>
       Name                      Office Held                      Age
       ----                      -----------                      ---
<S>                         <C>                                   <C>
Paul J. Powers. . . . . . . Chairman of the Board of the          60
                                Board of Directors, President
                                and Chief Executive Officer

Hubert Jacobs van Merlen. . Senior Vice President and Chief       41
                               Financial Officer

Bruce C. Wheatley . . . . . Senior Vice President-Administration  54

Mark G. Kachur. . . . . . . Senior Vice President-Fluid           52
                               Purification

Robert A. Calcagni. . . . . Group Vice President-Building         55
                               Systems and Metal Products

John Gilchrist. . . . . . . Group Vice President-Hydraulic        50
                               Systems

William G. Welker . . . . . Group Vice President                  65

William W. Cushwa . . . . . Vice President - Planning,            58
                               Assistant Treasurer & Director

Gilbert M. Manchester . . . Vice President and General Counsel    51

Steven J. Hewitt . . . . .  Controller                            46
</TABLE>

    None of the officers are related and they are elected from year to year or
until their successors are duly elected and qualified.

    All of the Executive Officers have been continuously employed by the
Company for more than five years except Mr. Mark Kachur and Mr. Bruce Wheatley.





                                      -59-
<PAGE>   60
Part III - (Continued)


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
          (Continued)

    Mr. Kachur became an employee of Commercial Intertech Corp. in April of
1994.  Before joining Commercial, Mr. Kachur's experience includes: President
of Biotage, Inc., a biotechnology company engaged in high and low-pressure
chromatography and Group Vice President of Pall Corporation.

    Mr. Wheatley became an employee of Commercial Intertech Corp. in July of
1992.  Before joining Commercial, Mr. Wheatley's experience includes, Senior
Vice President of Marketing and Public Affairs of The PIE Mutual Insurance
Company and President of Dix & Eaton/Public Relations.





                                      -60-
<PAGE>   61
PART III - (Continued)


ITEM 11.  EXECUTIVE COMPENSATION

    Reference is made to the information set forth under the caption "Executive
Compensation" appearing in the Company's definitive Proxy Statement filed
January 18, 1996, which information is incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT

    Reference is made to the information contained under the captions "Security
Ownership of Board of Directors and named Executives" and "Security Ownership
of Certain Beneficial Owners" in the Company's definitive Proxy Statement filed
January 18, 1996, which information is incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Reference is made to the information contained under the caption
"Compensation of Directors" in the Company's definitive Proxy Statement filed
January 18, 1996, which information is incorporated herein by reference.





                                      -61-
<PAGE>   62
                              Part IV


ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
           FORM 8-K.

           (A)  DOCUMENTS FILED AS PART OF THIS REPORT:

           (1)  The following consolidated financial statements of Commercial
                Intertech Corp. and Subsidiaries are included in Item 8:

<TABLE>
<CAPTION>
                                                         Page Number
                                                        In This Report
                                                        --------------
           <S>                                               <C>
           Statement of Consolidated Income - Years
             ended October 31, 1995, 1994 and 1993. .         26
           Consolidated Balance sheets as of
             October 31, 1995 and 1994. . . . . . . .        27-28
           Statements of Consolidated Shareholders'
             Equity - Years ended October 31, 1995,
             1994, and 1993 . . . . . . . . . . . . .         29
           Statements of Consolidated Cash Flows -
             Years ended October 31, 1995, 1994,
             and 1993 . . . . . . . . . . . . . . . .         30
           Notes to Consolidated Financial Statements        31-57
           Report of Independent Auditors. . . . . . . .      58


           (2)  The following consolidated financial statement
                schedules of Commercial Intertech Corp. and
                Subsidiaries are included in Item 14(d):

           Schedule II Valuation and Qualifying
             Accounts . . . . . . . . . . . . .. . . . .     S-1
</TABLE>

    All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.





                                      -62-
<PAGE>   63
<TABLE>
<CAPTION>
PART IV (Continued)
<S>     <C>
ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
          (Continued)

     (3)  Exhibits

          3 -- Articles of Incorporation Filed as of April 17, 1992
               (Incorporated by reference to Exhibit I to the
               Company's Annual Report on Form 10-K for the year
               ended October 31, 1992)

         10 -- Material Contracts

               Exhibits

               (5)  Severance Compensation and Consulting Agreement
                    - Paul J. Powers dated February 15, 1988
               (10) Severance Compensation Agreement
                    - William G. Welker dated April 26, 1989
               (12) Severance Compensation Agreement
                    - William W. Cushwa dated September 28, 1989
               (13) Severance Compensation Agreement
                    - Steven J. Hewitt dated September 28, 1989
               (14) Severance Compensation Agreement
                    - Robert A. Calcagni dated September 28, 1989
               (15) Severance Compensation Agreement
                    - John Gilchrist dated June 25, 1992
               (16) Severance Compensation Agreement
                    - Gilbert M. Manchester dated September 28, 1989
               (17) Severance Compensation Agreement
                    - Bruce C. Wheatley dated July 20, 1992
               (18) Employment Agreement - Paul J. Powers
                      dated July 27, 1994
</TABLE>

               Exhibits 5, 10 and 12-18 for "Material Contracts" are
               incorporated by reference to exhibits filed with Form 10-K for
               the following years:

<TABLE>
<CAPTION>
                  Exhibits                    Year Filed
                  --------                    ----------
                    <S>                     <C>
                     5                      October 31, 1988
                    10                      October 31, 1989
                    12 and 13               October 31, 1990
                    14 and 15               October 31, 1992
                    16 and 17               October 31, 1993
                    18                      October 31, 1994
</TABLE>





                                      -63-
<PAGE>   64
<TABLE>
<S>      <C>
PART IV - (Continued)

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
          (Continued)

          Additional information relating to management contracts and
          renumerative plans is contained in Note D - Stock Options
          and Awards of the Notes to Consolidated Financial
          Statements on page 39.


          11 -- Statement re: Computation of Per Share Earnings

          22 -- Subsidiaries of The Registrant

          23 -- Consent of Independent Auditors

          27 -- Financial Data Schedule
</TABLE>

    (B)  There were no reports on Form 8-K for the quarter ended October 31,
         1995.





                                      -64-
<PAGE>   65
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                          Commercial Intertech Corp.

Dated:  January 24, 1996

<TABLE>
<S>                                  <C>
                                                                      
----------------------------------   ---------------------------------
Paul J. Powers                       Hubert Jacobs van Merlen
Chairman of the Board of             Senior Vice President and
Directors, President and             Principal Financial Officer
Principal Executive Officer

                                  
----------------------------------
Steven J. Hewitt
Controller
</TABLE>

        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated above.

<TABLE>
<CAPTION>
           Name                 Title                Date
           ----                 -----                ----
<S>                        <C>                    <C>
Charles B. Cushwa III      Director               January 24, 1996


William W. Cushwa          Director               January 24, 1996


John M. Galvin             Director               January 24, 1996


Richard J. Hill            Director               January 24, 1996


Neil D. Humphrey           Director               January 24, 1996


Gerald C. McDonough        Director               January 24, 1996


C. Edward Midgley          Director               January 24, 1996


John Nelson                Director               January 24, 1996


George M. Smart            Director               January 24, 1996


Don E. Tucker              Director               January 24, 1996
</TABLE>

                                      -65-



<PAGE>   66
                                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                                     COMMERCIAL INTERTECH CORP. AND SUBSIDIARIES

                                     YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993



<TABLE>
<CAPTION>
                            COLUMN A         COLUMN B           COLUMN C                 COLUMN D         COLUMN E
----------------------------------------------------------------------------------------------------------------------
                                                                ADDITIONS
----------------------------------------------------------------------------------------------------------------------
                                                                        CHARGED TO
                                             Balance at    Charged to    Other                            Balance at
                                             Beginning     Costs and    Accounts-        Deductions       End of
                                             of Period     Expenses     Describe                          Period
----------------------------------------------------------------------------------------------------------------------    
     <S>                                   <C>            <C>          <C>               <C>               <C>
                            Description

     Year ended October 31, 1995
       Deducted from asset accounts:
        Allowance for doubtful accounts
          receivable                       $ 2,889,576    $1,388,761              0      $  835,942 (A)    $ 3,442,935 
                                           ============   ===========  =============     ===========       ============

       Valuation allowance for deferred
           income tax assets               $58,587,000    $        0    $12,983,000 (D)  $4,701,000 (C)    $66,869,000 
                                           ============   ===========  =============     ===========       ============

     Year ended October 31, 1994
       Deducted from asset accounts:
        Allowance for doubtful accounts
          receivable                       $ 1,764,726    $  990,026   $ 2,384,000 (B)   $2,249,176 (A)    $ 2,889,576 
                                           ============   ===========  ============      ===========       ============

        Valuation allowance for deferred                               $ 9,129,000 (D)
          income tax assets                $ 4,210,000    $        0   $47,340,000 (B)   $2,092,000 (C)    $58,587,000 
                                           ============   ===========  ============      ===========       ============

     Year ended October 31, 1993
     Deducted from asset accounts:
       Allowance for doubtful accounts
         receivable                        $ 1,611,566    $  581,798   $         0       $  428,638 (A)    $ 1,764,726 
                                           ============   ===========  ============      ===========       ============

       Valuation allowance for deferred
         income tax assets                 $ 2,570,000    $        0   $ 1,640,000 (D)   $        0        $ 4,210,000 
                                           ============   ===========  ============      ===========       ============
</TABLE>



     (A) Uncollectible accounts written off.
     (B) Represents beginning balance acquired with the ORSTA Hydraulik
         acquisition.
     (C) Net operating loss carryforwards utilized or expired.
     (D) Increase in net operating loss carryforwards for the year.


                                      S-1